The Return of King Coal? – the Myth and the reality

One of the enduring issues in the current Presidential campaign has been resentment in the old coal-mining areas of the USA against the Democratic Party, and Hillary Clinton in particular, concerning the decline of the coal mining industry in the broad region of the USA known as Appalachia.
Coal mining in Appalachia began in the 19th century. Some limited mining took place before the Civil War, but the real expansion occurred after the Civil War and into the early 20th Century as industrialization spread throughout the USA, increasing demand for coal for iron and steel manufacture. During that period, coal mining involved mostly extracting coal from seams underground using drift mine and deep mining techniques. The work was labor-intensive, dirty, and very dangerous. Fatalities and injuries were numerous.
By the middle of the 20th century, mining companies began transitioning from deep mining to what became known as strip (or open-top) mining, where the strata above the coal seams is stripped, dug or blown away, and the coal is then scooped up by gigantic bucket cranes. Strip or open-top mining is cheaper, and it requires fewer workers. However, the above-ground environmental damage is enormous. There are numerous hills in Appalachia which have been planed off down almost to ground level, destroyed to dig up their coal seams.
Exploitation of a coalfield is analagous to fruit-picking. The most lucrative seams, thickest and easiest to mine, are extracted first. Then progressively less accessible seams are slowly exploited. Eventually, most of the easily recoverable coal has been removed, the cost of extracting remaining coal rises steeply, and the coalfield slowly becomes unprofitable. This is a classic pattern, seen in numerous coalfields in the world.
In Appalachia, these events have been occurring for decades, part of the natural process of exploitation of what is a non-renewable resource (hanging around 100+ million years for new seams to be formed is not an option). Most of the easy-to-extract coal in Appalachia was mined decades ago.
However, there are two other factors that also entered the equation.
The first variable was the opening of open-cast mines in the Western states, specifically the Powder River basin in Wyoming. The world’s largest open-cast coal mine is in Wyoming, extracting coal 365 days a year.
The second variable is the overall price of coal. The trend for the last 5 years has been downwards. Coal as an energy source is dirty relative to other natural energy sources like natural gas, and is horribly dirty compared to wind and hydro-electric power. Demand for coal in China has declined due to the slowdown in the Chinese economy, and current market prices are around $40 per short ton for coal delivered from mines. This is not good for Appalachia, where extraction costs have reached that amount. By contrast, coal from Powder River Basin in Wyoming has an extraction cost of less than $10 per short ton. However, even in Wyoming, where deep coal seams are close to the surface and easily extractable, there are coal reserves that may never be mined due to the long-term decline in coal prices.
You don’t need to be a math genius to realize why Appalachian coal extraction is declining. Actually, it is worse than that. A number of coal companies have closed down or filed for bankruptcy. They cannot compete in a saturated low-price world market with coal from Appalachia at its current extraction costs.
Many of the companies also have future obligations for environmental restoration, clean-up and worker’s pensions that they are manouvering to minimize or shed. This is one example of corporate chicanery to allow coal mining companies to walk away from pension and other worker benefit committments. This kind of behavior is part of the reason that the coal industry was nationalized after World War II in the UK. Coal corporations proved to be poor stewards of worker welfare and the environment.
The overall combinations of low coal prices, cheaper open-cast coal sources in the Western USA, and gradual exhaustion of Appalachian coal reserves are not reversible by governments. Quite simply, the extraction of coal in Appalachia in most cases is not economically viable.
If coal prices were to double again, it might be viable, but the long term viability will still decline as coal reserves are gradually exhausted.
As the number of coal mines shrinks, local economies of scale such as transport infrastructure, suppliers etc. will also disappear, pushing extraction costs up further. We saw this in the UK in the 1980s as coal mines closed in coalfields. The cost of running the remaining mines rose rapidly, as the economies of scale disappeared, which accelerated closures until all of the mines disappeared. The closed mines across Appalachia will not be re-opening unless there is a dramatic increase in world coal prices.
Coal-mining areas always become unhealthily dependent on employment and trickle-down from the mines. Young men without the means or the ability to pursue a college education always need a reliable source of employment, and coal mining has historically been fairly well-paid compared to other laboring occupations (the “danger money” aspect). So when those mines close, the economies of the areas always suffer badly. The result is high male unemployment, which in turn triggers all manner of social and family problems. Many of the displaced miners are poorly suited for other occupations. (Despite what some politicians and sociologists think, only a small percentage of former coal miners are budding business entrepreneurs).
The obvious response, tried in the UK and Europe for a while, is to provide price or cash subsidies to keep mines open. However, governments that have tried to subsidize coal mining to keep employment in a region always end up deciding to not pick up the tab after a while. The numbers involved are large, and they start to look awkward. So the mines slowly close anyway, communities crater, social discontent rises, and government is blamed by the resentful local communities.
Some attempts over the years have been made to create replacement industries in Appalachia. The challenge is that the most obvious replacement, manufacturing, is also going offshore, and computerization and robotization is also reducing the number of manufacturing jobs associated with that industry sector. New-wave industries such as solar power offer more potential.
In the USA, the EPA is a favorite target of local and regional resentments, since coal mining companies have become adept at pointing the finger at government, claiming that it loads the coal mining companies with costs. Well, sure it does, if you consider requiring a coal company to, you know, put the top back on a mountain that it blasted away to dig out coal to be “unnecessary costs”. Ditto the idea that retired workers who in many cases have chronic health issues from mining in dangerous conditions should get a reasonable pension. Personally think that this is a minimum requirement for responsible stewardship. But that’s just me.
When Donald Trump swans into coal-producing districts in Appalachia and promises to bring mines back, my first instinct is to ask “How the hell is he going to do this? with mirrors?“. His appeal, to communities that are still struggling with social and economic problems caused by lack of enough local employment, is an emotionally powerful for people feeling that government has abandoned them.
Trump is playing off the perception, promulgated by her opponents, that Hillary Clinton does not care about the economic plight of Appalachia. The memes being passed around are mostly bullshit, but they have resonated with resentful populations in the region.
Trump’s claims, as usual, have no plan behind them. This is probably because there is no viable economic case for re-opening any coal mining operation in Appalachia. The region’s time has come and gone as a coal producing region.
But can the government no subsidize coal mining? Sure it can be done. One thing that is obvious if you look at the history of government is that the land exerts a powerful emotional attraction for both communities and politicians, The entire corn ethanol program is nothing more than a multi-billion dollar boondoggle for the farming industry, shepherded into law by Senator Bob Dole. (Once again the GOP gave the lie to its grand claims to be the party of small government). The US expends a lot of money annually on farming subsidies, again shepherded into law by coalitions of Federal and state level politicians. Jobs are an important electoral weapon. The fact that there has been no concerted wide-ranging effort to address the economic blight of Appalachia is interesting, especially since the region’s political map shows mostly Republican representation at Federal, state and local level. So when people blame the Democratic party for being tone-deaf to Appalachia, I always ask what the Republican politicians have been doing to improve the economies of the communities. The answer is usually some combination of crickets and blaming “government regulations”.
However, unlike Donald Trump, Hillary Clinton has actually articulated a plan for the region. It is far from clear how viable or useful the plan will be, and whether it can even be implemented will depend on post-election dynamics. However, it is superficially better than the pie-in-the-sky dreams that if government simply writes a blank check for coal companies, that jobs will magically re-appear. There is as much likelihood of that latter series of events as there is of pigs flying over my rooftop.


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