United States coal outlook

Why have the government's coal policy initiatives failed to achieve their desired goals. The answer begins with the nature of coal itself. Relative to its hydrocarbon cousins, oil and natural gas, the production of coal is more dangerous and has significantly greater environmental impact. It is more difficult and expensive to transport and store, and, most importantly, its burning characteristics make for more costly utilization. Added to these inherent disadvantages are the costs associated with environmental and safety legislation. These laws, while necessary in concept, have significantly increased the cost of mining, transporting, storing and using coal, thus offsetting much of the comparative cost advantage to coal from rising OPEC oil prices. In addition, coal was put at a further disadvantage by the fact that the federal government kept oil and natural gas prices below the market level. Other factors adversely affecting coal costs have been higher wages, royalties and severance taxes, as well as increased costs of equipment, supplies, and transportation. The net effect of these conditions is illustrated in a table of 1978 relative costs: coal, 100; low sulfur fuel oil, 81; and natural gas, 70. Shown is a comparison of the relative costs of the three fossilmore » fuel alternatives available to a large industrial user. The annual costs of low sulfur fuel oil and natural gas have been indexed to the relative annual costs of the coal option; that is, coal equals 100. In addition, the percentage distribution of fuel costs and non-fuel costs to the total cost of each alternative is indicated.« less