"A new study finds that the high costs of production is helping to sink Appalachian coal.
The working paper, 'Coal Demand, Market Forces and US Coal Mine Closures,' was published by Resources for the Future, a Washington, D.C.-based nonpartisan environmental think tank, and funded in part by the National Science Foundation. Its finding about coal mining production costs being a larger factor in mine closures differs from the conventional wisdom in the industry, which generally centers on low natural gas prices squeezing out coal.
Joshua Linn, senior fellow of Resources for the Future and a co-author of the report, said he and co-author Ian Lange of the Colorado School of Mines set about to perform a rigorous analysis of what was driving the closures. Thirty-one percent of the nation's coal mines, many of them in the East, have closed since 2008, and mining employment has dropped 23 percent.
Linn said the study found that as mines age and reserves are depleted, production costs began to rise and productivity declined in the early 2000s among Appalachian mines compared to other parts of the country. The study, using Energy Information Administration data, found per-ton extraction costs doubled since 2002."
"The cost to extract coal, not competition from natural gas, caused the majority of mine closures between 2002 and 2012, a new report said.
The study from think tank Resources for the Future sought to pinpoint the cause of each of the hundreds of mine closures and the resulting thousands of layoffs.
'Although there has been heated debate at all levels of government on policies affecting coal mining, little is known about the recent causes of coal mine closures or about the effects of hypothetical future policies on the sector,' wrote the authors.
Scholars included Brett Jordan, a postdoctoral researcher at the University of Alaska, Anchorage; Ian Lange, assistant professor at the Colorado School of Mines; and Joshua Linn, associate professor at the University of Maryland and researcher at RFF."
"Joshua Linn and Richard Morgenstern of the nonpartisan think tank Resources for the Future and Wayne Gray of Clark University in Massachusetts looked at five-year, plant-level data from the U.S. Census of Manufacturing to weigh the impacts of lower natural gas prices on manufacturing employment from 2007 to 2012. The data are subject to confidentiality restrictions that make it harder to analyze than other sources."
"Also presenting at RFF was Jan Mares, a senior adviser with the group who worked in the Reagan administration on energy and trade issues.
Mares spoke first on behalf of Paul Cicio, the head of the lobbying group Industrial Energy Consumers of America, who was unable to attend the discussion, to poke holes in the new assessment.
Statistical models like the one used in the new study 'cannot address unique market realities as to how prices are impacted,' Mares said. On behalf of Cicio, Mares said the study fails to address growing natural gas demand that IECA estimates would consume 69 percent of 'technically recoverable' U.S. gas resources by 2050."