The Dangers of Counting on Coal

A year after the strike, the industry is still in the pits

It seems that the more the oil squeeze tightens, the bigger grows the glut of other fuels that ought to be easing the pinch. First came last winter's natural gas surplus brought on by price decontrol. Now, from West Virginia to Wyoming, miners are burying themselves under millions of tons of stockpiled coal that no one wants.

The Carter Administration has hoped that a doubling of coal output by 1985 would reduce the U.S.'s dependence on foreign oil. But production has risen by only about 10% from last year's strike-depressed level of 654 million tons, and consumption of the fuel has remained stagnant. Coal today supplies about 18% of U.S. energy needs, an increase of less than 1% since 1973, the year of the Arab oil embargo. Meanwhile, mines have closed, expansion plans have been shelved and by industry estimates, up to 10% of the nation's more than 200,000 miners have been laid off.

In Illinois, the nation's fourth largest coal-producing state, some 3,000 angry miners last week descended on the capitol in Springfield to protest the deepening gloom that is settling over the mines. In the rugged Appalachian heartland that reaches from the Virginias to eastern Kentucky, more than 10,000 miners have been idled since last summer, and they are angry and resentful.

The industry is suffering because the Carter Administration's coal policy was never fully thought out. The idea was that increased output would enable utilities and factories to switch from oil and gas to coal for generating electricity and for heating. In terms of energy content, coal is indeed a bargain compared with other fossil fuels. A ton of coal contains about the same amount of energy as 4 bbls. of crude oil, but at the going rate of about $25 a ton for most existing long-term delivery contracts, coal is only half as costly as OPEC crude. Unfortunately, the savings are offset by the huge costs of transporting and burning coal, and the tax incentives that the Administration proposed to ease that burden were woefully inadequate.

During the winter, Energy Secretary James Schlesinger began urging oil-fired utilities and factories to convert not to coal but to natural gas. This was to have been only a short-term move to help soak up the gas glut, but it created the misleading impression that coal was not the Administration's favorite fuel after all. Asserts Jim Larson, president of Energy Fuels Corp., Colorado's largest coal producer: "There is a simple lack of leadership. From where I sit, you just have to wonder what in hell is going on back there in Washington." The industry's biggest problem is that environmental laws have made digging and burning the fuel a bureaucratic nightmare. Worst offender: the antipollution amendments that Congress added to the Clean Air Act, with Carter's support, in the rush just before the summer adjournment in 1977. Enforcement regulations proposed by the Environmental Protection Agency would sharply tighten the already strict standards on pollution emissions and make burning coal more difficult than ever. The amendments already require, among other things, that new coal-fired plants install highly complex "scrubbers" to remove sulfur pollution from exhaust smoke. The scrubbers cost $80 million or more for an average-size, 800-megawatt generating plant. What really upsets coalmen is that the regulations would force utilities to use scrubbers to remove up to 85% of sulfur pollutants even from coal that has virtually no sulfur content at all, an incredible waste of money.

In Greenwich, Conn., the EPA has even successfully sued another quasi-independent federal agency, Conrail, and forced it to stop using a coal-fired generator that produces electricity for commuter trains. The generating plant is being converted at taxpayer expense to burn the very fuel the White House is trying to discourage--imported oil.

Seeing all this, businessmen are coming to the conclusion that burning coal is just asking for trouble. Since the annual growth of U.S. electric energy consumption has slowed from nearly 7% in the early 1970s to little more than 4% now, utilities are scrapping or deferring plans for new generating plants.

A few coal companies are faring well in spite of the industry's travail. In the West, strip-mine operations have benefited from low labor costs and long-term contracts at profitable rates. But other companies have wound up merely digging up the coal and dumping it on the ground. Utility companies have stockpiled so much that many now have no more room to store the fuel. Meanwhile, the surplus is forcing down contract prices for single shipments, which have tumbled from about $31 a ton a year ago to as little as $19 a ton now.

Prices will not stabilize until demand catches up with supply, and that could take months and even years if the Administration does not act effectively to make the fuel more attractive. In the long term, nothing is more important than enacting legislation to curb the regulatory rampages of the EPA, which in most cases is answerable to nobody. Right now, the most effective step the President can take is to free the price of domestic crude oil. As it floats up to world levels, bargain-basement coal will look more and more like the attractive alternative the White House keeps insisting it is.

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