COAL REPORT September 3, 2008

It seems odd to be getting southwest Virginia news from a website in India, but here goes … the Indian website Steel Guru reports that Virginia coal production was down by 18% in 2007. While US production overall was going up, and while prices are rising sharply, Virginia mines produced 23 million tons, down from 28 million the year before. The website says that Virginia coal peaked in 1990 at over 46 million tons and has been dropping ever since. Bill Bledsoe of the Virginia Mining Association said, “I can’t think of any reasons or mine closings or anything.” Mike Abbott of the Division of Mines, Minerals and Energy thought part of the decline was due to the closing of Consol’s Buchanan No. 1 mine in Buchanan County; the mine has since reopened. The website says that Virginia coal production is projected to drop to 20 million tons a year for a decade, then peter out.

The financial health of coal producers seems to move in tandem with the price of oil. As oil has gotten much more expensive recently, coal prices have risen too and coal companies are very profitable. The Toronto Globe and Mail reports that over the past year some coal stocks have risen by triple digits. But, as oil prices have dropped a bit lately, coal stocks are down as well, some 28 percent from their peak in June. But at least one financial firm things coal is still a good investment. An analyst told the newspaper that he expects that Massey Energy could rise by 19 percent in a year, and Arch Coal by as much as 35 percent.

Following the Crandall Canyon disaster there was a lot of criticism of the Mine Safety and Health Administration. From approving a dangerous mining plan to lax enforcement of safety rules to a botched rescue attempt that left three rescuers dead, it seemed that the federal safety agency was not doing a good job—so much so that the Labor Secretary, Elaine Chao, agreed to an independent investigation. That investigation was handled by two retired MSHA employees and their report was strongly critical of MSHA’s management. The investigators got a lot of inside information from 59 MSHA employees by promising that their work was confidential. But last week the Salt Lake Tribune reported that MSHA director Richard Stickler demanded, and got, the names of the MSHA employees who had talked about him. One of the investigators, Earnest Teaster Jr., is dismayed that his promise of secrecy was broken, “I want to maintain the protection of these individuals … I don’t think it’s appropriate for him, being the head of the agency, to find out who said what about him.” A Labor Department official promised there would be no retribution.
But a chorus of newspaper editorials has criticized Stickler. Even if there are no retributions, they point out that any future investigators would be hampered because people will know that what they may say would not be kept confidential. In the words of the Mountain Eagle, “After this breach of faith, can you seriously imagine federal employees talking candidly to investigators about the failings of their agency?”

After nearly two years of heavy criticism for lax enforcement, MSHA does appear to be stepping up its enforcement activities. And that has coal companies up in arms, according to the Mountain Eagle. Over the past 10 months, MSHA has hit operators with over $97 million in fines, up more than 140 percent from the year before, and has issued 8 percent more violations. Coal companies say it’s heavy handed, politically motivated, stifles productivity, increases costs, and keeps them from cashing in on a booming world market. MSHA director Richard Stickler says his agency is enforcing the law as it’s required to do. He has more resources to do it—with additional funding engineered by West Virginia Senator Robert Byrd, MSHA has hired 170 more inspectors to get back towards full strength.
Coal producers are looking at a favorable market. Prices have tripled over the past year, especially for metallurgical coal. James River, Arch, and Alpha—all companies cited in the Mountain Eagle as complaining about increased safety enforcement—have been mentioned as possibly being bought by global energy companies, in part because they are currently very profitable.