Daily Dose of Optimism

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

"America's Addiction to Oil" is Nonsense. Conservation is Not.

The unfortunate meme, "America's Addiction to Oil" is misapplied victimology that is completely inappropriate as an official position towards energy consumption and needs to be dropped.

Addiction is technically defined as "uncontrolled, compulsive use."

America is not "addicted" to oil, we have just responded rationally to plentiful supply of a useful resource at low prices for long periods of time. However, we now face the reality of increased competition around the world to consume those resources, along with the possibility that existing supplies are drying up.

Sounds like some conservation might be in order. Simple. However, instead we get this "addicted" concept.

Let's take a look at the first step of Alcoholic's Anonymous to see how addicts approach recovery:

We admitted we were powerless over alcohol--that our lives had become unmanageable.

Now, I would almost guarantee that Bush has uttered this statement in the past, and which is probably why he likes the idea of an "oil addiction" now. Sorry if that sounds like a low blow, but he did choose to utter it in his State of the Union address, which I believe was a disservice to both Americans and addicts.

And America is far from powerless over oil consumption. Saying that we are "addicted" to oil, as perhaps a heroin addict or alcoholic might be, removes our agency from the equation. Most of us are still rational adults, willing to listen and work together, even make small sacrifices for the greater good. We have the communication tools, means and ethics to make a major change if we feel necessary.

All we need to control our oil consumption is a strong leader with a vision to lead us there - encourage conservation, carpools, buying and driving smaller cars - and not just through a few sentences in the state of the union, but a real program with real incentives, and a coordinated message on TV and the web, at car dealerships, on roadways, etc. Remind me I need to conserve. Let me know I'm not the only person that's part of this process, and that our efforts are not futile or unnoticed. Share progress with the nation.

Instead, we get this idea that America is "addicted," which implies that we should wait for the government to form some kind of oil addiction clinic so we can go and get our oil meds (read: ethanol for our SUVs.) This country can - and needs to - do better. - Ed

Barron's with Good News for Nuclear Power (USU, CCJ, WGII) (Update 1)

Update 1: Added summary of key points

If you are invested in the nuclear power industry, here's some good news from Barron's.

Key points:

• Nuclear plants are the lowest cost means of producing electricity, at 1.68 cents per kilowatt hour, based on 2004 data (latest available)
• The last nuclear plant to come on line was in June 1996 (Watts Bar reactor, under the Tenessee Valley Authority)
  
• There are 103 operating nuclear reactors in the US
• Bush administration wants to encourage nuclear power, and is using tax breaks and investment incentives to do so
• Applications to build several plants are expected in 2006. Short term, this is a positive for engineering firms that will handle the contracts to build plants.
• When new nuclear plants come on line in several years, this will create incremental demand for uranium, bolstering the long term case for uranium producers
• Investment incentives include:
  • Streamlined licensing process
  • Government guarantees for certain debt payments caused by unforeseen delays
  • Production tax credit of $18 per megawatt hour, which could translate into $5-6 billion of economic benefit per plant. Since the construction cost of a new plant will be about $1.8 billion, returns could be 30% to 36% from tax benefit alone.

I will refrain from "glowing future" jokes. - Ed

[The nuclear energy lobby] believes 2006 will be the best year for the industry in at least a decade. They expect several companies to begin applying for new nuclear generating plants, a process that takes about two years. Once the approvals are in hand, the building can begin, which takes another four to five years.

The applicants will be helped by the Bush administration, which wants a U.S. that is less dependent on foreign energy. An animated Andrew Card, Bush's chief of staff, told a packed house at a U.S. Chamber of Commerce luncheon in Washington, D.C., Wednesday that the U.S. needs more nuclear power and that Bush would be talking about it throughout the year. In June, Bush visited a nuclear plant in Maryland to promote the industry, which received huge tax breaks and investment incentives in last year's energy bill.

The last of the 103 operating nuclear reactors built in the U.S. was the Tennessee Valley Authority's Watts Bar reactor, opened in June 1996, when regular gasoline sold for less that $1.30 a gallon at most U.S. filling stations. The nuclear plants are in 31 states. With fuel prices considerably higher, the nuclear alternative looks more attractive than a decade ago, when memories of the Three Mile Island fiasco were fresher. According to the Nuclear Energy Institute, the industry's policy and lobbying arm, nuclear plants are the least costly way to produce electricity, at 1.68 cents per kilowatt hour, based on year 2004 data, the latest available. Recent rises in the price of fossil fuels doubtless have magnified nuclear power's cost advantage.

Vermont -- the Green Mountain State -- turns out to be the poster state for the industry, getting 73.7% of its electric power from nuclear energy. It's followed by South Carolina (54.5%), Connecticut (54.4%), New Jersey (51.9%), New Hampshire(43%) and New York (29%). Politically, six of those are Democrat blue states, while just one, South Carolina, is Republican red. [...]