Let’s pretend


Drought, flooding, pollution, disease, hunger, energy shortages – we have the know-how and the manpower to conquer almost any challenge we face. All we lack is the money. And we lack the money because everyone pretends that we lack the money.

Currently the media outlets are buzzing about the coal industry, which is dying all over the world (especially in the USA) and which has no money to clean up its abandoned mines. Why is the industry dying? I’ll discuss that farther below, but right now we have a problem with abandoned strip mines and underground mines. Some are simply eyesores, but others are sources of water pollution, leaking acidic and otherwise toxic wastes into streams and groundwater supplies.


Under the Surface Mining Control and Reclamation Act (SMCRA) of 1977, coal mining companies are required to clean up a site after they shut it down. But the bankrupt coal companies have little money to clean up after themselves. Many smaller companies have skimped on cleanup obligations, or have simply disappeared, leaving behind abandoned strip mines and denuded mountains.

Funding for the cleanup of abandoned mines is supposed to be accomplished through a coal production tax. Mine operators must pay a tax of twelve cents per ton for underground mined coal, and twenty-eight cents per ton for surfaced-mined coal. The tax proceeds are put into the Abandoned Mine Reclamation Fund (created by SMCRA Act) to pay for the reclamation of abandoned mines.

The SMCR Act is enforced by the Office of Surface Mining Reclamation and Enforcement (OSM) which is a branch of the U.S. Dept. of the Interior. As of December 15, 2011, OSM has provided more than $7.2 billion to reclaim more than 295,000 acres of hazardous high-priority abandoned mine sites.

However this is not nearly enough money to clean up all the abandoned mines, which are multiplying in number. Many of the largest coal companies are so hopelessly in debt that they will never have the money to clean up their abandoned sites even if they wanted to. The Abandoned Mine Reclamation Fund was never intended to provide money for mass cleanup after an industry-wide collapse.


Fortunately the U.S. government has limitless money to clean up the mines, and to create jobs for people to do this work.

Unfortunately the U.S. government is “bankrupt.” Why? Because we pretend that it is bankrupt. Why do we pretend? To legitimize our hate and our selfishness.

For example, many people hate the coal industry because it created so much pollution. Now that the industry is in its twilight, these people could demand that the federal government pay for a mass cleanup, but it’s more fun to pretend that the U.S. government is broke, and to continue condemning the soon-to-be-extinct coal industry.

These people say that coal companies should be destined for criminal court, not bankruptcy court, and forced to clean up the abandoned mines. But as I noted above, the coal companies have no money. Every large U.S. coal producer is bankrupt, or on the edge of bankruptcy, and they all have massive debts. They can’t even pay their debt, let along pay for a mass cleanup.

Since almost everyone in U.S. society directly or indirectly benefited from coal, I say let the federal government provide the clean-up money. Think how many jobs it would create. Think how nice it would be to have ugly strip mines reclaimed and made into forests and meadows.

Unfortunately the federal government is “broke” because we pretend it is broke. Liberals and conservatives both pretend.

And so the scars will remain on the land. In many cases, local people will have their taxes raised to pay for clean-ups.


Out of curiosity, what killed the coal industry?

In the past few years, 26 coal companies have gone bankrupt and 264 mines have closed. The two largest coal producers, arch Coal and Peabody Energy, lost a combined $1.2 billion last year. Both are in bankruptcy. The stocks of companies that haven’t (yet) gone bankrupt are trading at small fractions of their values from just five years ago. Between 2009 and 2014, while the Dow Jones Industrial Average rose 69 percent, the Coal Sector Index lost 76 percent of its value. On 11 Jan 2016 Arch Coal, one of the United States’ largest coal companies, filed for bankruptcy.

What happened?

[1] Natural gas is much cheaper and cleaner. The price of a thousand cubic feet of natural gas at the wellhead dropped from $10.79 in July 2008 to $1.94 in May 2012. There’s no sign of gas returning to the highs of 2008. The Energy Information Administration estimates that the United States has 87 years of natural gas reserves at current consumption rates. Even if we significantly increase our consumption of natural gas, we still have a lot.

The sustained glut of natural gas has encouraged utilities to build gas-fired power plants, instead of coal-fired plants. In 2013, natural gas represented more than 50 percent of new power generating capacity in the United States. Coal accounted for just 11 percent, putting it a distant third, behind solar (22 percent) and only slightly ahead of wind (8 percent).

[2] Coal-burning plants are decrepit. More than 60 percent of coal-fired power plants are more than 40 years old. Many are nearing the end of their useful lives. New plants that run on cheap natural gas are replacing coal plants.

[3] Coal is one of the dirtiest fuels around, and environmental regulation is making it unprofitable. In 2011, the U.S. Environmental Protection Agency issued rules to reduce the emission of mercury and other toxics from power plants. (The Mercury and Air Toxics

Standards). About 40 percent of coal-fired plants must add emissions-control technology in order to comply, which will make coal an even more expensive energy source. By contrast mercury emissions from gas-fired plants are negligible.

[4] Killed by debt. Some of the biggest companies took out loans to buy smaller companies. For example, industry giant Arch Coal went on a buying spree in 2011, hoping that the coal industry would see rapid overseas growth in the coming years. However that overseas growth never materialized. As a result, Arch Coal has $1.8 billion in debt due in 2018, another $1.7 billion in 2019, and $1.5 billion in 2021. Arch Coal will not be able to come up with that much cash, because investors won’t lend them more money on favorable terms.

[5] Renewable energy has become cheaper, while coal plants have become more expensive to operate. Plus there are legal challenges to coal. Furthermore, investors are abandoning the coal industry.

[6] Falling demand from China. China consumes as much coal as the rest of the world combined (which is why China’s air pollution is so bad), but China has implemented protectionist measures to guard its domestic coal mining sector. Still, even Chinese coal companies are struggling – an estimated 7 out of 10 are not profitable.

[7] High-heat technology (e.g. for smelting) has improved. Coal is no longer the only fuel for blast furnaces.



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2 Responses to Let’s pretend

  1. Chunch says:

    Mexico has at least a million times more money than the US.

    The euro area has way more money than the US.



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