This morning's Intelligencer front page tells us that a group of Democratic senators are trying to "charge companies for pollution":
A group of Senate Democrats are pushing to charge companies for potential carbon dioxide pollution they cause while working on federal lands.
Sen. Maria Cantwell, D-Wash., ranking member of the Senate Energy and Natural Resources Committee, leads the group. The lawmakers sent a letter to the Department of the Interior, as Secretary Sally Jewell and her staff consider proposals to reform the way the federal government charges private companies to extract taxpayer-owned coal.
"Until the market price for coal reflects its true cost to society, taxpayers will continue to bear the costs of more extreme weather, collapsed ecosystems, stranded infrastructure, increased incidences of heart and lung disease and other effects of climate change," Cantwell wrote.
While the article seems to suggest that the reforms are meant to deal with climate change, it does hint that the senators are also interested in how the government receives payment for the use of Federal lands. (The article also includes its obligatory quotes from Murray Energy spokesman Gary Broadbent.) While I've written a number of times about the secondary costs of coal in what economists call "externalities," I wanted to deal with one of the major causes of the decline in West Virginia coal production that gets no coverage from our local our "newspapers:" cheap coal from the west -- more specifically, coal from the Powder River Basin (PRB) in Wyoming and Montana.
To begin with, PRB has a built-in advantage because the coal is closer to the surface and so it is cheaper to mine. As the Center for American Progress notes:
The largest, easiest-to-access coal seams in Appalachia have already been mined, forcing coal companies to spend more resources to extract coal from lower-profit seams. Coal companies in the Powder River Basin in Montana and Wyoming can extract more than 10 times as much coal per employee hour as coal companies operating in the Appalachian Basin.
The labor costs thus give PBR coal a huge advantage over Appalachian coal.
As labor productivity in a mine declines, coal prices often must rise in order to make the mine economically viable. Consequently, Appalachian coal is more expensive than coal from other parts of the United States. For example, the spot price for Northern Appalachian coal averaged almost $63 per ton for the week ending August 29, 2014. In contrast, the spot price was less than $12 per ton for Powder River Basin coal and $44 per ton for Illinois Basin coal.
Most importantly, however, according to these sources, is that this coal is mined on Federal lands and as such, is heavily subsidized by the government. Without the subsidies, Appalachian coal would be more than competitive. Here is Carl Pope (former executive director of the Sierra Club) admitting that Appalachian coal would be viable if not for the western coal subsidies. (I realize that Pope is a biased source but here he is admitting that Appalachian could be viable - something you wouldn't expect from a former Sierra Club official.)
What the administration has done that is hurting Appalachian coal is to continue a history of sweetheart giveaways of Power River Basin coal. PRB's price undercuts Appalachian coal in significant part because PRB operators like Peabody Coal -- which previously owned Patriot but spun it off to duck its obligation to pay the pensions of its miners -- get public coal without any competitive bidding, a practice currently being investigated by the General Accounting Office.
Appalachian coal would be mined if it was not undercut by PRB coal -- there is more than enough eastern and Midwestern demand even after the pending wave of power plant closures to use every seam in the region.
A similar conclusion was reached by a Center for American Progress study done earlier this year:
Taxpayers are not the only ones hurt by an outdated coal royalty system. Federal subsidies in the PRB unfairly disadvantage coal producers in Appalachia and other regions, contributing to job losses and economic dislocation in Appalachia. More broadly, the DOI’s subsidies for coal distort U.S. energy markets, incentivize U.S. coal exports by subsidizing transportation costs, disadvantage cleaner sources of energy, and ultimately undercut the president’s Climate Action Plan.
Okay, the issue of coal subsidies on Federal land is not a new one so why have our "newspapers" never dealt with, or even mentioned, the major subsides that western coal receives which gives it such a huge cost advantage over Appalachian coal? Maybe it's tough to connect this to their usual scapegoat, the president, since the subsidies have been around for a number of years. I'm not sure why western coal's unfair competitive edge is ignored except that I notice that in the article Murray Coal's Gary Broadbent gets to weigh-in on the topic. I also looked to see how other newspapers were covering this story and found that the story is actually a week old and that very few newspapers outside Senator Cantwell's district seem interested in the story. (My hunch is that the basics for this story were given to the Intelligencer by Murray Coal last week and that Casey Junkins did some research to give it some balance.) I then checked to see what Murray Coal owns in the Powder River Basin and had problems finding an answer probably because (1) Murray is not publicly-owned, and (2) as a number of the sources suggest, the coal companies in the PRB have set up difficult-to-tract subsidiaries to take advantage of the tax laws.
Again, why have our "newspapers" never discussed western coal subsidies? In the larger picture, maybe the answer relates to what I wrote below -- that our local "newspapers" real concern is for coal owner's profits regardless of their origin.