Coal industry tanks as mining costs rise
If I asked you to go out in your yard (sorry, city dwellers — a “park”) and dig up some rocks, you’d say: no big deal. You go out, grab a spoon, dig out a rock. If I asked you to do it again, in the same spot — no problem. Maybe you need a trowel, but you go and bring me a rock. But then if I ask you to do it in the same spot for 50 years? Eventually getting rocks becomes a giant, expensive pain in the ass.
And that’s the metaphor I’m using to explain how mining costs are knee-capping the coal industry.
We’ve discussed how Big Coal is on its way out, pushed by super-cheap natural gas. But even if gas weren’t cheap, coal is getting more expensive — in large part (as we noted last year) because the easy-to-access coal has already been mined.
From the Washington Post:
Although it’s commonly said that the United States is the Saudi Arabia of coal with more than 200 years worth of reserves, digging up those coal reserves and delivering them to customers has been getting more expensive.
That’s because of rising costs of transportation, explosives, wages — and geology. In most areas, companies first dig coal from areas that are easiest to access and that have the thickest, richest seams. Over time, however, it becomes more expensive to mine — and more difficult to do so profitably.
Or, to put it more directly:
“The issues aren’t mine inspectors and environmentalists. It’s a geological fact of life in central Appalachia,” said Tom Sanzillo, a former senior official in the New York State comptroller’s office and now a financial consultant. “You mine for 100 years and you take a lot of coal. It’s the cost of production. That’s the reality of it.”
This is the problem with a non-renewable resource. A wind turbine doesn’t need to be moved once it uses all the wind in a region (though it could be!). You don’t need to move a solar panel once it has absorbed all of the sun in an area. But coal ain’t coming back. So we have to dig deeper or knock the tops off mountains to get at the stuff.
Man, when Mitt Romney reads this article, he’s going to realize how wrong his Obama “war on coal” ads were and be pretty embarrassed. Mitt, if you’re reading, feel free to leave an apology in the comments. And while you’re at it, see if you can’t dig me up some rocks.
Cost of mining coal continues to climb,