Coal mining practices and environmental impacts

Coal Mining Industry Report

The objective of this work is to discuss the impact on the coal mining industry in terms of shifts and price elasticity of supply and demand, positive and negative externalities, wage inequality and monetary and fiscal policies. This work will conclude with final thoughts on how the economy affects the success of this industry and the economic influences that can affect the industry in a negative way.

The coal mining industry in the United States is comprised of approximately 1,000 companies operating approximately 1,500 mines, with approximate combined annual revenue of $25 billion. Some of the larger producers are Peabody Energy, Arch Coal and Massey Energy. Over the past decade, the coal mining industry has become greatly consolidated and presently sixty-five percent of the market is owned by approximately ten companies with each company operating a single coalmine with the size of the mines varying a great deal. Larger operations produce over 1 million tons of coal annually. According to Hoover's website in the work entitled: "Industry Overview: Coal Mining" "Demand comes mainly from generators of electricity. Profitability depends on efficient operations, as the product is a commodity sold on the basis of price." (2008) the smaller companies are able to compete when they supply customers locally or in the event that they hold long-term contracts while the larger companies "have large economies of scale in production and distribution." (Hoovers, 2008) the coal mining industry is "capital-intensive and highly automated..." (Hoovers, 2008) Average annual revenue for the companies per employee is stated at $300,000.

I. SHIFTS and PRICE ELASTICITY of SUPPLY and DEMAND recent 'World Steel Review' published in December, 2007 states that: "Crude steel production in the 67 countries reporting to the IISI totaled 114 million tons in October, 6.6% up on October 2006. The ten months total was 1,102 million tons, 8.1% higher than the same period last year. However, excluding China, the rise in steel production was only 2.8% in October and 2.9% in the year to date." (World Steel Production Report)

II. POSITIVE and NEGATIVE EXTERNALITIES

The U.S. Department of Labor forecasts that coal demand will experience an increase, "...as coals remains the fuel source for electricity generation." (2007) Environmental concerns are stated to exist in relation to "coal power - burning coal releases pollutants and carbon dioxide -- few alternatives exist on a scale large enough to meet the fuel demand of utilities. Natural gas burns cleaner than coal, but coal power plants equipped with scrubbers reduce this disadvantage, and both fuels emit greenhouse gases. Recent increases in the price of natural gas have also caused some electricity producers to delay their conversion to natural gas, which is helping to maintain demand for coal. Future increased use of nuclear power or renewable energy sources, such as solar or wind power, could reduce demand for coal, but over the projection period neither is expected to increase rapidly enough to contribute significantly to U.S. energy supplies." (2007) it is expected that advances in technology in the mining industry will have an adverse affect upon employment in coal mining due to "new machinery and processes will increase worker productivity." (2007) These advances will result in a requirement of less workers than previously for running the "...operation and maintenance of new mining machines that are operated remotely by computer and that self-diagnose mechanical problems. " (U.S. Department of Labor, 2007)

Environmental concerns will greatly affect mining operations and it is reported that government regulations are on the increase relating to land access restrictions and mining restrictions geared toward protecting animal life and native plant life and toward bringing about a decrease in water and air pollution. Population growth is increasingly resulting in the expansion of living settlements into areas with mining activities nearby. Depletion of the East's coal deposits that are most accessible combined with the foregoing stated reasons is forecasted to result in "...a shift in coal production. Coal mining will increase in the Central, and particularly the Western, United States and decrease in the East." (U.S. Department of Labor, 2007) Forecasts state that coal-mining employment will overall experience "little employment change as rising demand for coal is met with productivity gains from more efficient and automated production operations." (U.S. Department of Labor, 2007)

III. WAGE INEQUALITY

The U.S. Department of Labor, Bureau of Justice Statistics states that coal industry "...average earnings of wage and salary workers in mining were significantly higher than the average for all industries. In 2006, production workers, earned $21.40 an hour in oil and gas extraction, $22.08 an hour in coal mining, $22.39 an hour in metal ore mining, and $18.74 an hour in nonmetallic minerals mining, compared to the private industry average of $16.76 an hour

Figure 1 and Figure 2 below show the 'Average Earnings of Non-Supervisory Workers in 2006 and Median Hourly Mining of the Largest Occupations in Mining, May 2006, respectively.

Source: U.S. Department of Labor (2007)

The U.S. Department of Labor report states that earnings are higher for the average of all industries. However, the report also states: "Working conditions in mines, quarries, and well sites can be unusual and sometimes dangerous." (2007) Moreover the U.S. Department of Labor report states: "Underground mines are damp and dark, and some can be very hot and noisy. At times, several inches of water may cover tunnel floors. Although underground mines have electric lights along main pathways, many tunnels are illuminated only by the lights on miner's hats. Workers in mines with very low roofs may have to work on their hands and knees, backs, or stomachs, in confined spaces. In underground mining operations, unique dangers include the possibility of a cave-in, mine fire, explosion, or exposure to harmful gases. In addition, dust generated by drilling in mines still places miners at risk of developing either of two serious lung diseases: pneumoconiosis, also called "black lung disease," from coal dust, or silicosis from rock dust.' (2007)

IV. MONETARY and FISCAL POLICIES

The work of Stephen Leahy entitled: "Climate Change: U.S. Moving Backwards" relates that even while global warming "melts the Artic, the United State's biggest banks are investing billions. Carbon regulations are coming...It is folly to build new coal-fired plants. However, that is exactly what Bank of America and Citi (formerly Citigroup) are doing. Leahy relates the well-acknowledged truth that "Electricity generation from coal is the biggest source of carbon dioxide (CO2) emissions in the world - larger than deforestation or the transportation sector." (2007) Leahy reports that the Artic ice cap "shrank dramatically this summer have left scientists shocked at the speed and extent of the melting. Coal currently supplies approximately half of the U.S.'s electricity and produces 80% of the sector's CO2 emissions. Building new coal-fired plants -- which have projected lifespans of 50 years -- would undo virtually any and all domestic efforts to reduce carbon emission..." (2007) Leahy concludes by noting the insanity of investing in 19th rather than 21st century technology. (2007; paraphrased) Leahy states: "Instead of investing the estimated 140 billion dollars in coal, financial institutions should be investing in clean energy options like solar, wind and energy efficiency..." (2007) Investment in energy efficiency and clean energy initiatives has the possibility of a 19% reduction in electricity demands in the United States by the year 2025 and would also bring about an elimination of "...the need for new coal power plants." (Leahy, 2007) Coal mining is inclusive of removal of mountaintops as well as "enormous strip mines and millions of tons of toxic waste..." (Leahy, 2007)