SIC 1222
BITUMINOUS COAL UNDERGROUND MINING



This classification includes establishments primarily engaged in producing bituminous coal in underground mines or in developing bituminous coal underground mines. This industry includes underground mining by owners or lessees or by establishments that have complete responsibility for operating bituminous coal under-ground mines for others on a contract or fee basis. Bituminous coal preparation plants performing such activities as cleaning, crushing, screening, or sizing are included if operated in conjunction with a mine. Independent bituminous coal preparation plants are classified in SIC 1221: Bituminous Coal and Lignite Surface Mining.

NAICS Code(s)

212112 (Bituminous Coal Underground Mining)

Industry Snapshot

In 2001 there were 719 underground coal mines in the United States, which produced 380.6 million metric short tons. Of total U.S. coal mines—underground and surface—48 percent were underground mines, which contributed 34 percent of all coal. West Virginia leads the nation in underground coal mining with 193 underground mines that produced 99.6 million metric short tons in 2001. Other leading underground coaling states include Kentucky (264 mines, 80.9 million short tons), Virginia (109 mines, 22.5 million short tons), and Pennsylvania (73 underground mines, 58.1 million short tons).

Despite its large size and its importance to energy and industrial markets, the U.S. underground coal mining industry is in some fundamental ways a troubled one. These difficulties first manifested themselves in the late 1960s and have continued unabated into the 2000s. A primary threat to industry participants has been the rapid proliferation of relatively efficient surface mines. Other detriments include increasing environmental constraints, labor problems, stagnant growth, and foreign competition.

Organization and Structure

In 1998 there were about 860 underground coal mines in operation. By 2001 that number had declined to 719 underground mines. Underground mines were more prevalent in the East, accounting for 64 percent of production. The majority of these mines were located in the Appalachian region. Surface coal mines were located primarily in the West, with the largest surface mines in the world found in the Powder River Basin, located in Montana and Wyoming. (See SIC 1221: Bituminous Coal Surface Mining ).

Steam coal, which represents the large majority of industry output, is most often used to power electric utilities. General industry, such as glass making and cement production, accounts for the next large portion of coal consumption. Metallurgical coal, or coking coal, is used for iron and steel production. Although they are classified as part of the same industry, these three segments differ in their reserve base, production facilities, distribution channels, and marketing requirements.

Besides regional distinctions and differences in mining techniques, underground mines differ in the quality and type of bituminous coal they produce. Eastern underground coal, for instance, is more likely to exhibit coking properties. Coal mined from underground operations in the Northeast typically has a high energy content and contains a widely varying amount of sulfur, a pollutant that is believed to be a major source of acid rain. Eastern Appalachian coal is most likely to have a very high sulfur content, while central Appalachian coal is comparatively low in sulfur. Much of the underground coal mined in the Midwest, such as Illinois Basin coal, is also high in sulfur.

Because it has a higher energy content and costs much more to produce, coal extracted from underground mines is more expensive than surface-mined coal. Appalachian coal, for instance, was priced at $28.24 per ton in 1995. In contrast, western surface mined coal was selling at $9.63 per ton. High transportation costs associated with western-mined coal tend to reduce this great disparity though.

Underground Mining Methods. Companies engaged in this industry extract coal that lies 200 to 1,000 feet below the earth's surface, though some mines are as deep as 2,000 feet. Underground mines consist of a series of parallel and interconnecting tunnels from which the coal is cut and removed with special machinery. The process is complex and sometimes dangerous. The mine must be adequately ventilated to protect miners from dust and explosive methane gas that is released by the coal. In addition, careful ground control must be practiced to prevent the roof of the mine from collapsing on workers and equipment.

Three types of underground operations are distinguished by the method used to access the coal mine. Drift mines are characterized by the use of a level tunnel leading into the mine, while slope mines have an inclined tunnel, and shaft mines utilize a vertical tunnel. The primary methods of extracting coal from all of these mines are room-and-pillar, long-wall, and shortwall.

Room-and-pillar mining is often the least efficient method. It often allows recovery of only about 50 percent of the coal, although there are occasions when this methodology can achieve a much greater recovery percentage. Long-wall and shortwall mining, in comparison, extract up to 80 percent of the usable coal. In a room-and-pillar operation, coal is mined in a series of rooms cut into the coalbed. Pillars of unmined coal are left intact and serve to support the mine roof, as miners advance through the coal seam. Sometimes the coal in the pillars can be extracted later in the "retreat" phase.

The two basic types of room-and-pillar mining are conventional and continuous. Conventional mining consists of a series of operations that involves cutting and breaking up the coalbed, blasting the bed, and then removing the shattered coal. Continuous mining, on the other hand, uses a machine that digs and loads coal in one operation, without blasting. The majority of room-and-pillar coal was extracted using continuous mining in the 1990s.

Long-wall mines use huge machines with cutting heads. The heads are pulled back and forth across a block of coal up to about 600 feet long. Coal is sheared and plowed into slices that are removed by a conveyor. Movable roof supports allow mined-out areas to cave in behind the advancing machine. In the mid-1990s, long-wall systems accounted for about half of all coal mined under-ground. Shortwall mining is similar to long-wall operations, but the continuous mining machine shears smaller blocks of coal, generally less than 150 feet long.

Background and Development

Bituminous underground coal was created during a 250- to 400-million-year process in which the ocean covered and compressed organic deposits. Low-grade coal material that eventually developed below the ocean floor was further compacted into higher grade bituminous coal. More extreme pressure, resulting from the folding of the earth's surface into great mountain ranges, such as the Appalachians, produced the highest grade coal. This high-grade coal is most likely to be found in the United States in underground mines along the eastern seaboard.

The first coal mined from the famous Appalachian bituminous coal field, which is more than 90 miles long and covers 63,000 square miles, occurred in the mid-1700s. Most of this coal, though, was simply dug from exposed coal seams on the earth's surface. During the 1800s, after the easily removable surface coal had diminished, underground mining became the industry standard. By the early 1830s in fact, underground mines were operating in many parts of Appalachia, as well as in several areas along the Mississippi River. In 1840 the U.S. coal industry mined its first 1 million tons.

As the coal industry gained strength in the 1850s and 1860s, the federal government began to play an increasingly important role in its development. Concerned about the loss of valuable federal coal reserves, Congress enacted the first legislation dealing specifically with federal coal resources in 1864. The legislation provided for the sale of coal lands at public auction for a minimum of $20 per acre, compared to $1.25 per acre for other types of land. The law was modified in 1865 to require that purchasers be miners, and that one buyer could acquire no more than 160 acres.

The Coal Lands Act of 1873 added further regulations to the sale of lands with coal reserves by stipulating new prices for federal lands that were located near railroads. This act remained the dominant law regulating federal coal reserves until the 1920s, when The Mineral Leasing Act was passed. The Mineral Leasing Act of 1920 essentially ended an era of federal coal disposal. By requiring mining companies to lease, rather than purchase, coal reserves, the act instituted an ideology of close government planning and supervision of federal coal production.

The Industrial Revolution. By the late 1800s, U.S. coal production had reached a staggering 250 million tons per year. As the industry expanded, huge numbers of miners were employed to work underground. Besides suffering dismal working conditions for relatively low pay, miners were also exposed to serious hazards. Unsafe mining practices often resulted in cave-ins or explosions that killed hundreds of workers at a time, and poor ventilation gave many miners "black lung," an ailment caused by inhaling large amounts of coal dust.

To relieve the plight of underground miners, federal and state government bodies began regulating and mandating safety standards in the early 1900s. In addition, workers succeeded in forming powerful labor unions that forced improvements in working conditions and higher salary scales. Although workers began forming state unions as early as the 1890s, the United Mine Workers of America (UMW) had become the dominant force for change in the industry by the 1930s. By 1960 UMW members were responsible for 75 percent of industry output.

At the same time that industry workers were making gains, underground coal mining companies were also realizing successes. Industrial growth in the early 1900s pushed U.S. coal production to more than 500 million tons per year in the early 1920s, the large majority of which was extracted from underground mines. International demand for U.S. coal following World War II further aided the companies; exports reached a record 80 million tons per year in the mid-1950s. Furthermore, the introduction of long-wall systems in the 1950s rapidly increased industry productivity. These factors combined to enable many coal companies to reap huge profits between 1900 and 1950.

Total demand for U.S. coal subsided after World War II—a result of the proliferation of alternative fuels, such as natural gas and oil. Nevertheless, coal producers benefited from the huge productivity gains achieved in the 1950s and 1960s because of the introduction of new mining techniques and advances in machinery. Although coal production fell to about 400 million tons per year by the late 1950s, worker productivity increased 50 percent, and payroll costs declined between 1940 and 1960. In addition, an increase in the demand for undergroundmined metallurgical coal helped offset decreasing demand in other areas. The United States became a major supplier to Japan and Europe, who were trying to rebuild their countries. Until the late 1970s in fact, the United States supplied 30 to 50 percent of those regions' import demand. Many underground coal mining companies were thus able to maintain profit growth throughout the 1960s.

Industry Downturn. In the late 1960s and early 1970s, the underground bituminous coal industry suffered serious setbacks. Most importantly, coal production in the United States rapidly shifted from underground mines in the East to surface mines in the West. New surface mining technology and machinery, which allowed companies to surface-mine coal at drastically reduced costs, accelerated this trend in the 1970s and 1980s. Furthermore, western mine operators were able to employ mostly nonunion labor—a factor that eventually weakened organized labor's influence on underground mining companies across the country.

Also during the 1970s and 1980s, domestic demand for metallurgical coal, which is primarily supplied by eastern underground mines, dropped from about 10 percent of total industry production to 4 percent. Because metallurgical coal is usually of a higher grade than steam coal, the loss of this high-income domestic segment constituted a serious blow to many Appalachian mine companies. The drop reflected the overall decline in the late 1960s and 1970s of the U.S. iron and steel industry, which was battered by foreign competition and productivity losses, among other problems.

Adding to industry turmoil in the 1970s and 1980s were stringent new environmental regulations and an increase in foreign competition in the export market. The loss of world export market share hit underground mining companies particularly hard, as they produced a proportionately larger share of export coal than do surface mining firms. Because of new safety and environmental requirements, moreover, underground mine productivity fell from 1.95 tons per miner hour in 1969 to just 1.04 tons by 1978.

As producers battled on several fronts, total demand for underground coal rose only 2 percent between 1980 and 1990. New legislation, much of it intended to protect the environment from both surface and underground mining operations, further pressured the industry. The Surface Mining Control and Reclamation Act (SMCRA) of 1977, the 1988 National Bituminous Coal Wage Agreement (NBCWA), the Ford-Wallop Agreement, parts of the Comprehensive National Energy Policy Act, and several other legislative efforts increased downward pressure on coal industry profits, although environmental groups continued to protest that the measures were insufficient.

The net effect of western mining growth, diminished demand in some high-margin markets, and new regulations contributed to the decline of underground mining. Despite an overall rise in coal consumption to more than 950 million tons by 1990, the share of U.S. coal produced by underground miners plummeted from 65 percent in 1965 to about 40 percent by 1985. Even massive gains in productivity during the 1980s, to 2.54 tons per miner hour, were unable to restore profits for many ailing companies.

Though the number of underground mines dropped in the 1990s—in 1993 there were more than 1,100 U.S. mines, but in 1998 there were only about 860—underground mining production increased through the 1990s, rising from about 351 million tons in 1993 to 430 million tons in 1998. The increase in production was due primarily to the trend toward larger and more efficient mines. The increasing use of long-wall and continuous mining methods also helped boost productivity.

1998 was a banner year for overall coal production, which reached a record 1.12 billion tons, according to an estimate from the Energy Information Administration. This amount, which was the fifth straight year U.S. coal production output was more than a billion tons, reflected an increase of 2.6 percent over 1997 numbers and 18.3 percent over 1993 figures. Output in the East accounted for 51 percent, or 570.6 million tons of the total, while production in the West reached a record 547.6 million tons, 49 percent of the total. Though coal production continued to migrate to the West, underground operations continued to dominate production in the East. Data from the Energy Information Administration revealed that productivity levels, when calculated in terms of tons per miner, had more than doubled since 1985. However, the number of miners employed as underground miners had declined. While more than 64,000 underground miners had been employed in 1993, this figure dropped to 51,000 in 1998.

According to a 1998 survey by the National Mining Association, the four top-producing underground mines included the Enlow Fork Mine in Pennsylvania, the Twentymile Mine in Colorado, the Bailey Mine in Pennsylvania, and the Mountaineer Mine located in West Virginia. Wyoming and West Virginia were the top coal-producing states in the nation, producing about 314 million and 171 million tons, respectively, in 1998. However, West Virginia was the leader in 1997, in terms of shipments of processed bituminous coal from under-ground mining operations, followed by Kentucky and Pennsylvania.

The federal government owned about a third of the U.S. coal resources in 1998, according to estimates by the Bureau of Land Management. The government's reserves consisted of about 92 billion short tons of recoverable coal reserves, considerably more than the 20 billion tons held by the next largest holder of reserves, the Great Northern Limited Partnership. The Peabody Group came in third with an estimated 10.3 billion tons, followed by CONSOL Energy Inc., and Arch Coal Inc. Each had less than 4 billion tons of coal reserves.

Phase One of the Clean Air Amendment Act of 1990, which set a goal of cutting sulfur dioxide emissions nationwide by 10 million tons by the year 2000, went into effect on January 1, 1995. The law required electrical generating plants to lower smokestack emissions of sulfur compounds, but gave utilities wide latitude in how this might be accomplished. Plants that exceeded requirements received allowances that could be sold or exchanged on the open market. Because of this market-based approach, the legislation had not, by the time Phase One went into effect, had the calamitous effect that some analysts had feared. Most utilities had not found it necessary to install expensive scrubbers, but had found switching to low-sulfur coals and purchasing allowances adequate to meet the law's requirements. Midwestern mines that produce coal with a higher sulfur content felt the impact of the legislation most severely, while western low-sulfur coal producers experienced some relative benefit. The threat of increased environ-mental controls related to carbon-dioxide emissions and land reclamation was, however, a source of concern for many producers.

The Clean Coal Technology Program, a partnership between the U.S. government and private industry, began in 1986 with the goal of developing options for controlling hazardous emissions. With an investment of more than $6 billion, by the late 1990s the program had about 40 projects either completed or in development. These projects included advanced power generation systems designed to increase coal-to-electricity efficiencies, environmental control devices to reduce pollution in a cost-effective manner, and efficient coal processing and cleaning processes.

Current Conditions

Underground coal mining came into national focus during the summer of 2002, when nine coal miners were amazingly rescued after being trapped 250 feet below the earth's surface in a coal mining accident in Quecreek, Pennsylvania. The incident sparked numerous lengthy accounts by journalists and a made-for-television movie, which highlighted the significant dangers faced by under-ground coal miners.

Underground coal mining is facing significant challenges in the twenty-first century, one of which is struggling with increasingly stiff competition from very efficient surface mines, primarily located in the Western region. For example, Pennsylvania, the nation's leading underground coal mining state, has 193 surface mines. However, these 193 mines produce just 16 million metric tons of coal, compared with 17 surface mines in Wyoming that produce almost 369 million metric tons of coal, making Wyoming the nation's top coal-producing state.

Found primarily in the East, underground mining produces more coal that is denser in sulfur than coal found in the Western region, causing high-sulfur coal to emit more environmentally undesirable pollutants when burned. Although coal industry experts expect the Bush administration to leave room for coal mining firms to operate with few new environmental regulations, smokestack emissions will continue to be a problem that will need to be addressed. Despite environmental concerns, coal remains a very viable source of energy in the United States because it is both abundant and inexpensive, albeit heavy (up to 70 percent of coal's cost is related to transportation expenses).

Coal consumption is expected to increase during the first 25 years of the twenty-first century in conjunction with increased energy usage. Although natural gas is expected to siphon off a portion of coal's market share, increased energy consumption should keep coal mining operations busy. After falling for the last three decades of the twentieth century, coal prices stabilized during the first years of the 2000s, as production decreased slightly and demand increased slightly. Prices are not expected to change dramatically, unless new environmental rulings are instituted that would increase the cost of production. Earnings growth will also come from cost-cutting measures, including increased automation to lessen workforce expenditures.

Industry Leaders

Consolidation among coal companies was extensive during the late 1990s. Arch Coal purchased the U.S. coal interests of ARCO, and Horizon Natural Resources (formerly AEI Holding Company, Inc.) acquired the coal interests of both Zeigler Coal Holding Company and Kindill Mining, as well as the Martiki Coal Company, a subsidiary of MAPCO Coal Inc. In addition, AEI secured a portion of the coal properties of Cyprus-Amax Coal Company. Other acquisitions included the Kennecott Energy Company purchase of Kerr-McGee's Jacobs Ranch Mine, the American Coal Corporation's buyout of Kerr-McGee's Galatia Mine, and MAPCO Coal Inc.'s purchase of the Cimarron Division of Andalex Resources.

The largest U.S. producer of coal in 2002 was Peabody Energy Corp., which had 33 U.S. mines and produced over 190 million short tons. Peabody had sales in fiscal 2002 of $2.71 billion, resulting in a net income of $105.6 million. The second largest producer of coal in the United States was Arch Coal, Inc., which produces more than 115 million tons of coal per year. The company had 2002 sales of $1.5 billion, resulting in a net loss of $2.6 million. The third biggest producer was CONSOL Energy, Inc., with net income of $10.6 million in 2002 on sales of $2.1 billion. Horizon Natural Resources is another major coal mining operation in the United States. Although Horizon posted revenues in excess of $1.4 billion in 2001, the company's heavy debt load—a result of numerous acquisitions in the 1990s—caused the company to declare Chapter 11 bankruptcy twice during 2002, leaving its future uncertain.

Workforce

Unions were increasingly concerned about job security in the 1990s. Coal companies argued that rising costs were pinching profit margins. Union leaders pointed out that coal production had increased 200 percent over the past two decades, while costs had been reduced by 50 percent, largely through payroll savings. Labor negotiators also charged mine companies with shifting production to nonunion facilities. By the end of 1993, however, the United Mine Workers union had agreed to terms with both the Bituminous Coal Operators Association and the Independent Coal Bargaining Alliance, the multiemployer bargaining groups of the industry, and had signed five-year contracts. This was only accomplished, however, after bitter strike actions and negotiations with the association.

Job opportunities are expected to continue to degenerate in the underground coal mining industry. According to the Bureau of Labor Statistics, employment in the coal mining industry was expected to decline about 35 percent from 1998 to 2008. In 2001 about 76,800 people worked in the coal mining industry, down from about 91,600 people in 1998. By 2008 the number employed in the coal mining industry was expected to drop to about 59,400 overall, with 12,078 in mining, quarrying, and tunneling occupations.

America and the World

The United States was the second largest coal exporting nation in the world in the mid-1990s, accounting for approximately 24 percent of the global export market. In 1998 U.S. companies exported about 76 million tons. More than 59 percent of U.S. coal exports were metallurgical grade in the mid-1990s, which was primarily produced in eastern underground mines. Much of the high-grade steam coal exported was also produced in that region. West Virginia alone distributed 49 percent of U.S. coal exports in 1995. The leading customers for U.S. bituminous coal in the late 1990s were Canada, Japan, Brazil, and the United Kingdom, in that order.

Foreign Investment. A weak foreign dollar, the exit of traditional steel, oil, and utility interests, and the decline of European coal industries combined to generate an influx of capital into the U.S. coal industry in the early 1990s. The most significant move was made in 1990, when U.K.-based Hanson PLC acquired Peabody Holding (for which it paid $1.25 billion), America's largest coal producer. Similarly, Rheinbraun A.G., of Germany, paid $890 million for a stake in CONSOL Energy, the nation's second largest producer. Kennecott Energy was also acquired by the British conglomerate RTZ. At the same time, U.S. companies such as Cyprus AMAX, ARCO, and Peabody, were involved in coal mining ventures in Australia and South America.

Research and Technology

To combat regulatory entanglement, stagnant prices, and increased competition, underground coal companies were increasingly looking to advanced mining and coal burning technologies for help. In addition, the industry was seeking new uses for its products that could open new markets.

Of critical and immediate importance to the under-ground coal mining industry was clean-burning coal technology that could reduce sulfur emissions and allow utilities to comply with new Clean Air Amendment Act standards. Failure to achieve success in this area will likely result in many power plants converting to alternative fuels, a development that would devastate high-sulfur underground mining regions. The U.S. Department of Energy, working with researchers in coal companies and utilities, was developing five categories of research. Low-emission boiler systems incorporated advanced combustion and innovative flue gas cleaning systems in the initial design for new power plants. Pressurized fluidized bed combustion captured sulfur pollutants inside the boiler instead of in the stack and allowed combustion at temperatures below the point at which most nitrogen pollutants form. The integrated gasification combined cycle (IGCC) employed coal gasification rather than traditional combustion and combined a steam turbine driven by exhaust heat with the gas turbine driven by the coal gas. Indirectly fired cycles employed a design that heated a working fluid such as air to turn the turbine rather than the hot gases of combustion. Finally, integrated gasification-fuel cell combinations would link a coal gasifier with a fuel cell.

The Wabash River coal gasification repowering project in Terre Haute, Indiana, demonstrated on a commercial scale and in a commercial utility environment that IGCC technology can effectively meet both energy and environmental needs. Wabash River, a joint venture of Destec Energy Inc. and PSI Energy Inc., was selected as a Department of Energy demonstration project in September 1991 and went online in August 1995. The plant was built in the 1950s, but the project replaced one of six original coal fired units with a new gasification process and combined cycle power block.

Several more unusual approaches to meeting government regulations were being explored. Microterra Inc., of Florida, was trying to patent a system that utilized genetically engineered bacteria that lived on a diet of sulfur. A prototype system was already being used by Freeport McMoran Inc. Porter's system differed from past efforts by other researchers in that it consumed sulfur in 36 to 48 hours, compared to 10 to 48 days for similar systems.

Another approach reported in the mid-1990s used pellets of zinc titanate to absorb the sulfur. The advantage being tested was that the hot coal gas produced in the coal gasification process has to be cooled only to about 1,000 degrees Farenheit to remove the sulfur instead of to room temperature, as in other processes. The zinc pellets are dropped through the column of hot gas, absorbing sulfur as they fall, and then returned to the top of the column in an elevator. In another project, researchers were striving to replace coke used in processing iron and steel with "formcoke," made from less expensive and more abundant nonmetallurgical grade coals.

Further Reading

Ellenbecker, Scott. "Once Again, Drillers Rise to the Challenge." National Driller, September 2002, 28-32.

Fiscor, Steve. "Forecast Returns to Normal for 2003." Coal Age, 1 January 2003.

——. "Most of the Demand Variables for 2003 Lie Beyond the Coal Industry's Control." Coal Age, 1 January 2003.

Freme, Fred. U.S. Coal Supply and Demand: 2002 Review. U.S. Department of Energy, Energy Information Administration. Available from http://www.eia.doe.gov .

Hofman, Mike. "Spotlight: Coal Comes in from the Cold." Inc., February 2003.

Ihle, Jack. "Coal Forecasting: Modeling the 'Commodity."' Coal Age, 1 February 2003.

Lask, Ellen. "In Vogue, for Now." Petroleum Economist, January 2002, 31-34.

National Mining Association. "1998 Coal Producer Survey Special Report." July 1999. Available from http://www.nma.org .

"Stakes are Heating Up." Mechanical Engineering-CIME, August 2002, 4.

Talley, Roy M. "Don't Count Coal Out." Dallas Business Journal, 6 July 2002, 43.

U.S. Department of Energy, Energy Information Administration. Annual Coal Report 2001: Executive Summary. Available from http://www.eia.doe.gov .

——. Annual Energy Outlook 2003 with Projections to 2025. Available from http://www.eia.doe.gov .

U.S. Department of Labor, Bureau of Labor Statistics. 2001 National Industry-Specific Occupational Employment and Wage Estimates. Available from http://www.bls.gov .



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