Via Roll Call
By Hal Quinn
Former Ohio Governor Ted Strickland and his colleagues at the Center for American Progress believe the answer for unemployed coal miners is separating more of them from their jobs (“Congress Should Correct Distortions in the Coal Market and Invest in Struggling Coal Communities,” Roll Call, Feb. 11, 2015). Increasing the cost of mining coal and the price of electricity generated from it will no more help stricken coal communities than medieval physicians helped the sick by bleeding them.
For some time CAP has been marketing a policy package designed to increase the cost of coal mining in the Western United States. The newest version features a wrapper exploiting the misery thrust upon Appalachian coal miners by government policies long championed by CAP. Seeking to divert blame, CAP claims federal coal leasing policies have created market distortions placing Appalachian coal miners at a competitive disadvantage. This fictional narrative is belied by facts revealing that federal coal leasing policies pose no threat to Appalachian coal miners. Rather, the administration’s job-crushing policies aimed at all coal mining have had an outsized impact on Appalachia.
What CAP calls inequities are actually differences in geology and scale. Coal seams in the Powder River Basin are thick and extensive allowing large scale operations with lower mining costs. On the other hand, Powder River coal has lower energy content and travels much further to potential customers. Indeed, the transportation cost for Powder River coal comprises on average 60 percent of the final delivered cost — three times more than Appalachian coal.
When it comes to leasing and royalties, once again Powder River coal is at a distinct disadvantage. The 12.5 percent royalty rate set by law is substantially higher — about 40 percent more — than the prevailing rate for private Appalachian coal. And coal companies mining Powder River coal pay substantial upfront and non-recoupable bonus bids for the right to mine, a cost rarely, if ever, faced by Appalachian producers.
Royalties are paid on the value of coal measured by the price received from the initial sale — a commercial norm reflected typically in private, state and federal leases. CAP believes that for federal coal this is wrong — they want to inflate the royalty by also including transportation costs. That is like asking taxpayers to pay income tax on their wages plus their commuting costs.
The real market distortions are ones induced by unbalanced policies that largely explain why over the past three years some 20,000 men and women — most of them from Appalachia — no longer have their high wage coal jobs. These policies include:
• A moratorium on new coal mine permits in Appalachia imposed by the Environmental Protection Agency within months of the administration assuming office in 2009. Thousands of jobs were destroyed and many more never created as companies frustrated by years of delay withdrew their applications.
• EPA power plant emission rules forcing the premature closure of hundreds of coal-fueled power plants with most of them located in states served by Appalachian coal mines. By the EPA’s own calculation, these rules cost of $9 billion annually in exchange for a meager return of $6 million in benefits.
• The EPA’s pending costly power plan the agency concedes will close hundreds more highly efficient coal-fueled power plants serving as the reliable backbone for delivering low-cost electricity 24/7 to our nation’s businesses and households. The EPA advances this plan in the name of climate change while unable to quantify any climate benefits.
Appalachian coal miners, families and communities deserve better than CAP-style policies shifting responsibility for the bad consequences that follow from bad policies. Indeed, all Americans deserve better since whenever a coal miner loses his or her job, all Americans lose something — low-cost, reliable power and, in turn, perhaps their jobs as well.
Coal miners recognize real friends and real solutions. They know they won’t find either in politicians and organizations trying to pit coal miners against each other.
Hal Quinn is the president and chief executive officer of the National Mining Association.
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- On February 17, 2015