Coal Report for June 19, 2013

Coal Report 06-19-13 6m 02sec

Jim Justice // photo from the Free-Lance Star at http://www.freelancestar.com/2013-06-17/articles/11021/justice-coal-billionaires-money-woes-irking-his-creditors/

According to the Associated Press, billionaire West Virginia coal operator Jim Justice owes large sums of money to a number of different mining-related businesses across Central Appalachia.  At least nine different electric, repair, and maintenance companies have sued him since 2011, saying they are not being paid for their work, and even more businesses haven’t sued but still say Justice owes them money.  A group of coal truck operators went so far as to go on strike at two Justice mines in Harlan County this January after they said he owed them over $500,000.  Justice said that leaving some debt unpaid was necessary to stay in business and that regardless, “everybody should be really confident they’re going to get paid.” But many of his debtors are nonetheless frustrated.  One business that Justice owes over $240,000 to said “When you do business with a billionaire, you think you are going to get paid.”  A Pike County attorney suing Justice on behalf of a drilling company said that many of these mining-related businesses don’t really have a choice but to continue doing business with him and hope that he eventually pays them, because, huge debts or not, his mines are still open.

Many Kentucky coalfield county leaders are upset after the state announced that 2.5 million dollars of this year’s coal severance money will go toward renovations of Rupp Arena in Lexington. The Lexington Herald-Leader reports that many coal-producing counties, which rely on coal severance money to provide basic services, are being forced to slash budgets this year due to falling local coal production, and Pike County Judge-Executive Wayne Rutherford, for one, called this plan a “raid on our coal severance funds for their project.”   The Kentucky General Assembly decided last year that the 2.5 million for Rupp Arena would come from Local Government Economic Development Fund, a pot of money within the coal severance fund specifically meant to help coalfield counties diversify their local economies through helping build businesses not affiliated with coal.  Kentucky House Speaker Greg Stumbo, of Prestonsburg, defended the plan, saying “Though Rupp is not in the coalfields, many believe it plays an important role in the state because of the tradition of the University of Kentucky basketball program.” He also said he hopes to get this money replaced back into the Coal Severance Fund after it’s spent.  But many coalfield leaders are still upset, including Harlan County Judge-Executive Joe Grieshop, who said “I love UK basketball as much as anybody, but this wasn’t a good use of coal severance money.”

According to a new report from the US Dept. of the Interior, the US is losing tens of millions of dollars every year by charging excessively low lease prices to coal operators who mine on public lands in the Powder River Basin in Wyoming and Montana.  The Bureau of Land Management, which is run by the Dept of the Interior, sets its own price for the value of coal on federal property, but reportedly, the value they’ve set has consistently been so far below market that taxpayers have lost nearly $29 billion in revenue over the last thirty years. Further, many sales of mining leases on public land had only one bidder.  This isn’t the first charge of wrongdoing in the area either–this past winter, two senators ordered a federal investigation into whether coal operators were dodging some $28 billion in royalty payments on coal mined on federal land in the Powder River Basin.

The Wall Street Journal reports that China is shifting its economy away from heavy industry toward consumer goods. This spells trouble for the Appalachian coal industry–if China is making less steel, it’s buying less coal. Metallurgical coal exports had been a recent bright spot for Appalachian coal producers, but that’s changing–last year US coal exports were a record 126 million tons, but this year, exports are already down by 10 to 15 percent. To make matters worse, US coal producers opened new mines when the metallurgical coal price jumped in 2011, but now those mines are ready to operate but without much of a market. An executive of XCoal, a coal trading firm, said, “There’s a tremendous oversupply. You have too many tons chasing a smaller market.” Worst of all is the fact that US coal—particularly Appalachian coal—is expensive to mine. US metallurgical coal costs around $140 a ton to produce, while the Australian company BHP can mine it for $110. So while exporting metallurgical coal had seemed to be one place where Appalachian producers could make money, but as China slows its industrial growth, that’s seeming more doubtful.

The Coal Report is a weekly production of WMMT. It is assembled from newspapers and press services and reports coal-related material as these sources give it. It does not represent the opinion of WMMT on the matters discussed. Our aim is to reflect both local developments regarding coal and the big picture we’re a part of. For feedback, comments, or questions, email [email protected]

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