60 Minutes on Coal Safety in Harlan County, Kentucky

60 Minutes ran a piece on coal mine safety this Sunday. The piece looked at the spate of recent deaths in Harlan County, and focused on the efforts to improve mine safety by wives of men who were killed in recent accidents. I found the piece interesting, but lacking in substance.

I think the deaths we have seen in mines recently were driven by record coal prices over the past few years, a large amount of formerly dormant capacity being brought online in a short period of time to take advantage of pricing, and greed, by both mine workers and operators, to haul as much tonnage as possible. Everyone in a mine makes more money based on the amount they can take out of the ground, so while owners are generally most culpable, everyone potentially shares some of the blame.

Take a look at the graph below, and notice that the price of anthracite coal (the good stuff) is about as high as it ever has been (non-inflation adjusted) in the past few years.

Source: CRB, through 2004 (sorry, free historical data ain't always up to date)

Looking at current data (last three years) notice that among all the coal regions in the US today, that Central Appalacian Coal (where Harlan County is located) commanded an astronomical price, at least through the middle of 2006. Central Appalachia is also where the accidents have occured:

International Coal (ICO), which owned one of the mines (Sago) that had the worst single accident, was formed just a few years back from a bunch of bankrupt mine operators. The Sago accident exemplifies the challenges the industry is facing right now: upstart firms bringing dormant capacity online to take advantage of record pricing. Harlan County is about a five hour drive from Sago, and both have the priciest variety of coal.

The miner's wives are right to push for mine safety, and I hope they are successful in doing so. My only gripe with the episode of 60 Minutes is the application of Occam's Butterknife to trying to understand why mining deaths have increased lately. With a multi-million dollar production budget, understanding and explaining issues should not be out of the question.

The answer, in short, is that we're in the middle of a bull market in commodities.

Of course, don't expect 60 Minutes to actually interpret the world for you (that's what the DDO is for). With a bunch of touch-feely septuagenarians at the helm, 60 Minutes basically reveals that it is painful to lose a husband in the mines, that mine owners are greedy and camera shy, and that a lawyer fighting this very issue in court will not admit to sh*t.

One plaudit for 60 Minutes is this interesting video from the same segment on how miners actually get the coal out of the ground. Scary, and fascinating. - Ed