A major coal-mining company that has pushed the Trump administration for a bailout of the industry quietly signed a deal last fall with a Chinese manufacturer to produce mining equipment and did not disclose it to the White House or other government agencies.
The deal with China is setting off alarm bells for free-market advocates and others who support President Trump's "America First" policies, as well as the administration's efforts to punish China for its unfair trade practices of "dumping" cheap goods in the United States, including aluminum and steel, as well as washing machines and solar panels.
A spokesman for Murray Energy, whose CEO Robert Murray is a major Trump backer, confirmed the deal with Zhengzhou Coal Mining Machinery Group, Co., or ZMJ, to make mine shields. The spokesman said it was necessary to meet a sudden time crunch to keep a mine in Utah running.
Mine shields are hydraulic roof supports that keep the walls and ceilings of mines from collapsing and are partly composed of steel.
A Facebook post first tipped off critics to the Chinese business deal. During a mid-January trip to China, Murray Energy executive Eric Lipinski marveled at the technology and height of the 28-foot tall mine shields made by the Chinese company.
"Spent the morning touring the ZMJ Factory in China," Lipinski wrote on Facebook in a post he later deleted. "We are building equipment here for our mine in Utah. For my mining buddies…check out these shields that they are building here in China and Mongolia."
"They are over 28' high. Unbelievable how big these are and the fact that they are used underground," he wrote in the post.
The American Energy Alliance, a nonprofit that advocates for free-market policies and opposes energy-specific subsidies, has applauded the Federal Energy Regulatory Commission's January decision to deny Department of Energy Secretary Rick Perry's effort to subsidize coal plants.
Critics have said the subsidies could cost billions of dollars a year in increased electricity costs to U.S. consumers. An analysis from Resources for the Future found that the new rule would have cost electricity end-users $72 billion between 2020 and 2045.
Critics also pointed to the Trump administration's and Congress's successful effort to unravel Obama-era regulations to ease business for the coal industry.
Kenny Stein, the Alliance's policy director, said the Murray Energy's decision to simultaneously do business with China while trying to win a government subsidy should raise red flags in the administration.
"It certainly strikes me as bad optics that they have been arguing for subsidies and support from the federal government in the name of saving U.S. jobs while at the same time buying equipment from China," Stein told the Washington Free Beacon.
The White House, as well as the Energy and Commerce Departments and U.S. Trade Representative, did not return multiple requests for comment.
Murray Energy Corp. spokesman Gary Broadbent confirmed that a subsidiary, UtahAmerican Energy, Inc., ordered a set of "longwall shields" from ZMJ to "facilitate its continued operation of its Lila Canyon Mine [in Utah]."
"UtahAmerican selected ZMJ as it was the only manufacturer, in the world, who could produce these shields to our exact safety and operational specifications, within the necessary time frame," Broadbent said.
Broadbent called it a "minor purchase" and said they did not disclose it because it "is not relevant to the Trump administration." He declined to disclose the total purchase price for the shields.
Broadbent also stressed that Murray Energy has an equipment and machine factory in Illinois that is the only domestic producer of longwall shields in the United States. He explained that the factory could not make the shields for the time period the Utah coal mine required to continue operating.
"AEMI has produced over 700 shields in America, all of which are utilized at Murray Energy's mining operations. Except for these special shields, we use all American-made shields," he said.
A source who backs Trump's efforts to protect U.S. jobs and crack down on China said the United States' depleted manufacturing base could have prevented Murray Energy from finding a domestic manufacturer who could produce the mining shields in a timely and cost-effective way.
Aside from Murray Energy's subsidiary, two companies with a large U.S. presence, Caterpillar and Joy Global, make mining shields. A Japanese company, Komatsu, recently purchased Joy Global. Both companies also make the shields overseas. There are other shield manufacturers in Europe.
Lipinski's Facebook posts came the day after the Federal Energy Regulatory Commission (FERC) ruled against the subsidy, and a day before Murray Energy CEO Robert Murray publicly slammed it.
"That does not sit with me well," Murray told CNBC's Power Lunch on Jan. 10, the day after the ruling.
Corey Lewandowski, Trump's former campaign manager, also slammed FERC, four of whose commissioners are Trump-appointed, a day after its decision, accusing them of being part of the "deep state" effort to kill the plan.
"The deep state is very real," Lewandowski tweeted with a link to a New York Times story about the FERC's decision. "More government officials who don't support the Trump agenda."
Last fall, Politico reported that Lewandowski worked with Murray Energy and electric utility FirstEnergy Corp. to push for the coal bailout, reportedly meeting with senior administration officials on the issue in the spring and summer and setting up meetings between Chuck Jones, the CEO of FirstEnergy, and Trump and other White House officials.
FirstEnergy is a major client of Murray Energy, reportedly buying roughly two-thirds of their coal from Murray in 2015
The article, citing White House officials, questioned why Lewandowski did not file as a lobbyist for either FirstEnergy Corp or Murray Energy.
Lewandowski has denied that Murray Energy or FirstEnergy paid him for work and said he did not set up any White House meetings with its executives. He repeated that denial to the Free Beacon on Monday.
"I've never done work for Murray Energy—I haven't been paid one dime, one penny—that's as clear as I can be," he said. "I didn't set up any meetings. I know that doesn't fit the narrative that you want to write."
He also said he did not know anything about Murray Energy's deal in China and said he tweeted about the FERC denial because "I tweet about a lot of things," before abruptly hanging up.
Perry had pushed the subsidy for coal and nuclear power plants on national-security grounds, arguing that these plants make the energy grid more resilient when faced with the threat of major outages from extreme weather or threats from foreign governments.
Perry asked FERC in September to create a rule that would compensate plants that keep 90 days of supply on site, arguing that this so-called baseload energy is necessary to keep the U.S. grid resilient.
The idea was widely opposed by other sectors of the energy industry, from oil and natural gas producers to wind and solar. All five FERC Commissioners agreed that Perry's proposal was not justified.
Last fall, at the same time Murray Energy was inking the deal with the Chinese factor, Murray was strongly pushing for the Trump administration subsidy. Murray Energy employees and its PAC donated nearly $200,000 to the Trump campaign, and Robert Murray held a 2016 fundraiser for Trump in West Virginia, federal election records show.
Perry and others in the administration may still try to find way to provide some direct government assistance to the coal industry, according to a report in Bloomberg late last week. The new plan would involve Perry using his authority as energy secretary to provide emergency compensation for coal plants run by FirstEnergy Solutions.
DOE spokesmen have said the report is inaccurate, but Bloomberg has not retracted it.
Murray Energy's Broadbent told the Free Beacon the company is "unaware" of any current action by Perry to provide emergency compensation but the company would support the effort if it is underway.
"Invoking this provision would be an excellent action by the DOE in light of the failure of the Federal Energy Regulatory Commission to address the lack of reliability and resiliency in the electronic power grids, and to preserve low cost electricity in American," he said.