An Outsider Looks at Coal

9:00 a.m., June 28, 1983 MR. MORTENSEN: Good morning ladies and gentlemen. Again, it gives me great pleasure to welcome you to another session of the 79th meeting of the Rocky Mountain Coal Mining Institute. The thing again that has always been impressive are the activities that we've had so far. The success in the meetings has been delightfully encouraging to all of our committee people. Please welcome the chairman of the session, Charlie Margolf. MR. MARGOLF: Thank you, Vernal. Good morning, ladies and gentlemen. It would be my privilege to serve as the session chairman this morning. To allow the maximum time for our speakers, I'll turn the microphone over to Bernie Bernstrom who will introduce our first speaker. MR. BERNSTROM: Thank you. As Vernal mentioned, Dan Jackson will be our first speaker. He is the Western Editor of Coal Age Magazine. Dan really doesn't need an introduction to this group. He's belonged to the Rocky Mountain Coal Mining Institute about 25 years. Dan is a native of West Virginia and he's an ex-coal miner. He graduated form West Virginia University as an electrical engineer and worked for Amherst and West Bending Coal prior to employment by Coal Age Magazine. Back in 1972 Coal Age moved him to Denver from New York City. MR. JACKSON: When Vernal Mortensen asked me speak to the members of the Rocky Mountain Coal Mining Institute earlier this year I found it impossible to say no to the guy because of what he has contributed to western coal. Little did 1 know that the subject he had in mind would be entitled, "An Outsider's View of Western Coal." At first I asked myself-I've been associated with the coal industry for some 38 years, 12 years in national operations and 26 years reporting on it. You might say that I've been married to two industries, coal and the business press for 26 years, but today I'll put on my business press hat and try to make an impression of what an outsider might think of western coal. But at the outset, let's get one thing straight: When you say press, whether it's business press, the media or whatever, and you heard some comments yesterday as far as what the media has done .to this industry and there's been some definitions bandied around as to just what an editor is. One of the most recent ones has defined an editor as a person who can talk on any subject with an open mouth. Now that's not my case. Secondly, I don't give long talks. Several years ago I was giving a rather lengthy talk to a group similar to this and it was halfway through the talk when I noticed one guy on my right looking at his watch quite frequently. I didn't mind that too much because all of us do that once in a while, but when he looked at his watch, took it off and shook it, I thought, "My God, better cut short." But for more than a decade western coal has enjoyed substantial annual increases in production from some 30,000,000 tons in 1970 to some 264,000,000 tons in 1981, but 1982 was a different story. We lost about 6,000,000 tons of production in that year. In 1983 it's expected to be a little worse than '82. Coal historically doesn't rebound from a recession as quickly as other industries. It takes about eight to 10 months longer for us to really get moving again and I'm afraid that you'll still have to don your fighting helmets and flack jackets when you go out into the market to sell your product. Western coal, as you know, has problems and al l of them are not going away when the recession ends and they won't go away overnight. I'm sure most of you are aware of what those problems are. Carl Bagge and Jim Harris, along with other speakers, at this meeting have educated us well on those problems and I'm sure you'll hear more from Jim Watt at today's luncheon. If everyone in this room were asked to list three orfourof the most serious problems facing western coal, I'd make book that the total of the answers wouldn't vary by more than 3 to 5%, if that much. But coal is not the only mining segment in the U.S. with problems. Metal and non-metal mining has its share, too. I'd like to step back into the past for a few minutes, if I may, to a time when our problems were just beginning. Since 1979 a third of the nation's mines, including coal, metal and nonmetal have been shut down. The total volume of all mining in the U.S. in that year totaled some $24 billion. Today that figure has dropped some 21 %. The after tax rate on return for mining companies has fallen from 6'/% in 1980 to minus 3% in 1983. But that's really not where our problems began. They began 20 years ago when a profound change began taking place in the U.S. economy. Our economy had been growing at about 2'/-3% annually without exception except for the great depression. Our inflation rate was about I'/%, interest rates were running about 6%, and the federal budget was $77 billion, really great figures compared to today. From 1960 to 1980 the federal budget increased almost 1.000% and taxed paid by individual families increased by 700% during that same period. Despite the huge increases in taxes, the federal deficit kept getting larger and larger year after year and within this 20 year period the national debt climbed to a trillion dollars. Economic progress of this type can't continue indefinitely without some serious consequences. The result of that economy, well, you know what happened and there is a direct relationship of that