Coal Tattoo

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James C. Justice II is in the news again today, for his purchase of the Greenbrier Sporting Club, following up on his May deal to buy The Greenbrier resort.

Probably less noticed by most of the media will be this bit of news announced by the U.S. Mine Safety and Health Administration:  An MSHA report that found “unwarrantable failure to comply” with federal safety regulations led to the death last August of Danny L. Jones, 38, of Bradshaw, who was a truck driver at one of Justice’s coal mines in Southern West Virginia.

That’s the truck Jones was driving in the photo above, shown where it came to rest after Jones lost control of the vehicle going down a hill on the Pumpkin Patch Haulroad near Burke Mountain, at the No. 65 Mine in Wyoming County, operated by one of Justice’s companies, Double Bonus Coal Co.

Why did Jones die? The MSHA report makes it pretty clear:

The accident occurred because the RD 686SX Mack Coal Haulage Truck had numerous mechanical defects, the seat belt was missing, and the victim was not properly trained. The victim had three days experience operating a coal haulage truck at this site.

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Live chat: Coal’s costs and benefits

hendryxpic1.jpgHey gang, we’ve thrown together a quick Web Chat for this afternoon with Michael Hendryx, author of the West Virginia University study examining the costs and benefits of the coal industry to Appalachia.

We’ll start at 2 p.m. Visit our Web site to take part.

Weighing coal’s costs and benefits

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Sunday’s Gazette-Mail includes a story I did on the latest study by West Virginia University researcher Michael Hendryx,  who has over the last couple of years been doing fascinating and important work about coal’s impacts on Appalachia.

As I explained in the story, this latest study:

…Questions the idea that coal is good for West Virginia and other Appalachian communities, and recommends that political leaders consider other alternatives for improving the region’s economy and quality of life.

hendryxpic1.jpgHendryx and his co-author, Melissa Ahern of Washington State University in Spokane, compared age-adjusted mortality rates and socioeconomic conditions across Appalachian counties with varying amounts of coal mining, and with other counties in the nation. They converted the mortality figures to something called the Value of Statistical Life (VSL) estimates, and then compared that to accepted numbers for the economic benefits of the coal industry to our region.

The result?

The coal industry generates a little more than $8 billion a year in economic benefits for the Appalachian region. But, they put the value of premature deaths attributable to the mining industry across the Appalachian coalfields at — by a most conservative estimate — $42 billion.

The authors conclude:

The human cost of the Appalachian coal mining economy outweighs its economic benefits.

And, they recommend:

In response to this and other research showing the disadvantages of poor economic diversification, it seems prudent to examine how more diverse employment opportunities for the region could be developed as a means to reduce socio-economic and environmental disparities and thereby improve public health.

Potential alternative employment opportunities include development of renewable energy from wind, solar, biofuels, geothermal, or hydropower sources; sustainable timber; small-scale agriculture; outdoor or culturally oriented tourism; technology; and ecosystem restoration.

The need to develop alternative economies becomes even more important when we realize that coal reserves throughout most of Appalachia are projected to peak and then enter permanent decline in about 20 years.

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I’ve written before about “peak coal” — warnings that we may not have as much mine-able coal left as the industry would have us believe (See previous posts here and here Also see this excellent commentary by Coal Tattoo reader and frequent commenter Tom Rodd).

And now, today’s Wall Street Journal includes an article (Subscription required) that highlights this problem:

While there is almost certainly as much coal in the ground as … [the] Energy Information Administration believes, relatively little of it can be profitably extracted. Last year, the U.S. Geological Survey completed an extensive analysis of Wyoming’s Gillette coal field, the nation’s largest and most productive, and determined that less than 6% of the coal in its biggest beds could be mined profitably, even at prices higher than today’s.

And just read this quote from Brenda Pierce, head of the USGS team that conducted that landmark study:

We really can’t say we’re the Saudi Arabia of coal anymore.

The article goes on to say:

No one says the U.S. is facing a coal shortage. But the emerging ranks of “peak coal” theorists argue that current production levels may be unsustainable and, if anything, create a false sense of security.

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Breaking news: Gee resigns from Massey board

osu-gee.jpgMassey Energy Co. has announced that E. Gordon Gee, president of Ohio State University, has resigned from the coal company’s board of directors. The move comes as Gee faced growing pressure from environmentalists (and from OSU students) to break his ties with the controversial coal giant.

According to the Massey release, Gee said this in a letter to Massey CEO Don Blankenship:

My service on the Massey Board has provided me with a unique perspective to learn the problems and opportunities facing the nation’s energy sector. It has also given me the opportunity to work with people, both within the company, and on the Board, whom I appreciate and admire.

Blankenship responded:

…That Gee brought an important quality to the Massey board that is made up of a significant cross section of opinions on the important issues facing American energy producers today. “Coal is an essential, abundant American resource that keeps the national power grid humming,” Blankenship said. “We will certainly miss Gordon, who was a dynamic force in the free and open debate at our board meetings on our role as a major American energy force and how we can serve our nation.”

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Coal merger: Alpha NR to buy Foundation Coal

Breaking news this morning that Alpha Natural Resources is going to buy Foundation Coal for about $1.5 billion, in a deal that will create the third largest coal producer in the United States.

The joint press release about the deal is here  and there’s a slide show and an audio presentation available here.

Also, there’s media coverage from Reuters,  the Associated Press, the Dow Jones Newswire, and Bloomberg.

UPDATED: Additional coverage and commentary from Barron’s is available here.  And there’s a more detailed story out now from the AP, available on the Gazette Website here.

Things are tough all over: Massey pay cuts

This just in, from a Massey Energy filing with the Securities and Exchange Commission:

As previously disclosed by Massey Energy Company (“Massey”), in response to the current market conditions, Massey has taken action to reduce costs. In conjunction with and in support of Massey’s cost reduction initiatives, all of Massey’s named executive officers, Messrs. Blankenship, Phillips, Adkins, Snelling, and Tolbert, have taken a ten percent reduction in their monthly base compensation, effective as of May 1, 2009. Other compensation to which named executive officers are entitled by contract will remain unchanged, and payments under any employment and/or change of control agreement which are salary-based will continue to be based on the applicable unreduced base salary amounts for the named executive officers with employment agreements. 

The SEC filing is available here.  We’ve previously covered Massey CEO Don Blankenship’s 2008 pay cut here, and Gazette reporter Paul Nyden reported on Massey’s financial condition here.

News from AP: Outlaw coal miners?

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Southeast Community and Technical College instructor Terry Gilliam teaches inmates in the Harlan County jail the ins and outs of coal mining on Tuesday, April 21, 2009 near Harlan, Ky. By completing courses in the jail, the inmates will be certified as coal miners when they’re released, qualifying them for jobs that can pay in excess of $50,000 a year.

The Associated Press dubbed this story “mining outlaws.” Now, first, let’s be clear: Folks who pay their debt to society deserve second changes, as least as far as I’m concerned. But as one reader has already asked me: Is this how far the coal industry in Kentucky will go to avoid hiring experienced miners that might have union sympathies?

By ROGER ALFORD

Associated Press Writer

HARLAN, Ky. — Jerry Elliott hopes to trade his jail jumpsuit and slippers for a hardhat and work boots when he comes up for parole later this year.

Mining is one of the few bright spots in Kentucky’s otherwise dismal economy, and with coal prices high, officials have picked an unusual classroom — a county jail — to teach potential miners a dangerous, difficult job.

Elliott and about 20 other inmates at the Harlan County Detention Center crowd into a drab, locked room each Wednesday to learn the ins and outs of the mining industry, which employs 17,000 in Kentucky.

Their goal? Land lucrative jobs in the Appalachian coalfields, where hardy workers are in high demand.

“I’ve learned you can’t prosper from bad money,” said Elliott, who is serving time for drug trafficking. “An honest living, that’s the only life.”

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Massey CEO Don Blankenship was escorted from the Aracoma Alma No. 1 Mine by West Virginia State Police after the January 2006 fire that killed two workers. AP photo.

This just in from The Associated Press:

The chairman and chief executive of coal miner Massey Energy Co. received compensation valued at $19.7 million in 2008, a 17 percent decrease from the previous year, according to an Associated Press analysis of data filed with regulators Tuesday.

The Richmond, Va.-based company paid Don L. Blankenship $1 million in base salary and a bonus of $300,000, the same as the previous year.

Blankenship, 59, also received a performance-based cash bonus of $6 million, up 15 percent year over year.

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Patriot Coal: Mine “rationalizations”?

This Monday morning brought news of more coalfield layoffs, again by St. Louis-based Patriot Coal. Here’s The Associated Press story:

Patriot Coal says it’s cutting another 2 million tons of southern West Virginia production due to weak market conditions.
St. Louis-based Patriot says it’s idling two contract mines that produce metallurgical coal at its Wells complex. Metallurgical coal is used to make coke to fire blast furnaces and prices have slumped with the steel industry.
Patriot says its also going to take Saturdays off at its Hobet surface mine complex, which produces coal for electric utilities. Additionally, Patriot says it’s delaying the start of production from its new, two-mine Blue Creek complex.

Unfortunately, most readers won’t see the wording of Patriot’s news release, which described the move this way:

Patriot Coal Corporation (NYSE: PCX) today announced mine rationalizations to bring 2009 production in line with anticipated sales volumes. These actions further the Company’s Management Action Plan initiated earlier in the quarter in response to the weakened coal markets. As part of today’s actions, the Company plans to further reduce 2009 production by approximately 2.0 million tons.

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