Show cost of coal from mine to consumer consume r BY gim GEO OTIS SMITH AND C E the bituminous coal industry is a modern industry compared with the mining of anthracite and much of the bituminous coal land was acquired by the operating companies during the last twenty years for little if anything more than its surface value today there are large areas of bituminous coal bearing lands that because they are undeveloped and without railroads can be purchased at a low price but little or no anthracite land is on the market and little has changed hands for years the present average resource cost of bituminous coal is not much over 6 cents a ton or about 4 per cent of the average selling value at the mine in the pocahontas region and the pittsburgh district the royalties ar are e much ciuch higher but these like others that might be cited are exceptions one on e due to coal of special quality and the other to location factors which incidentally are exactly those that have assisted in making the resource cost of anthracite what it is should you be interested in summing up all these various costs and striking a balance between labors share and capitals return you would find that the mine worker the trainmen and the wagon driver together receive fully half of the price of the anthracite delivered at your house and the same three classes of labor receive not less than half the price paid by the average consumer for the cheaper soft coal in a similar manner the average return on the capital invested in land mining plant railroads and coal yard may be roughly calculated calculated with the result that landlord bondholder and stockholder of coal company and railroad together receive about from the ton of anthracite and only 50 to 75 cents from the ton of bituminous coal and of either of these amounts the mine operators share is only a small fraction cannot offer cure all it is not the purpose of this analysis of costs to offer any cure all for the high price of coal yet some comment on the facts presented may possess value at least certain lines of approach can be pointed out as not very promising for example anyone who is at all cognizant of the trend in price of labor and material can see little hope of relief in lower costs for these itous furthermore observation of the advances made in mining methods in the last decade or two affords slight warrant for belief in any charge of wasteful operation As consumers of coal we might do well to imitate the economy now enforced by the producers in their engineering gi practice in the northern anthracite field machine mining is extracting coal from twenty two and twenty four inch beds 4 and throughout the anthracite region the average recovery of coal in mining is 65 per cent as against 40 per cent only twenty years ago nor are the bituminous operators any less progressive in their conservation of the coal they mine yet it must be remembered that conservation og 0 a natural resource though it will undoubtedly be of direct economic benefit in the future is not essentially a cheapening process in fact these increased recoveries of coal have in large part become possible only because of a higher market price and following further this line of thought we may say that the increased safety in the coal mines that has come through the combined efforts of the coal companies the state inspectors and the federal bureau of mines necessarily involves some increase in cost of operation but the few cents per ton thus added to the cost is a small price to pay for the satisfaction of having the stain of blood removed from the coal we buy that form of social insurance which is now enforced through the workmans work mans compensation laws alone adds from 2 to 5 cents a ton to the cost of coal reducing length of haul in the item of transportation perhaps the most promising means of relief is that of reducing the length of haul though many a consumers preference for coal from a distant field over that from a field nearer home is based on special requirements the deciding element in the preference of other consumers is simply the price and this in turn may be largely due to a differential freight scale which is thus not in the public interest if we admit the premise that it is wasteful to burn coal in hauling coal into coal districts or past such districts except in so tar far as quality requirements absolutely demand the long haul coal the recent eastward movement of the higher grade coals in part caused by the export demand may involve some increase in the average length of haul and thus in the transportation cost of coal not exported but on the other hand this enforced adjustment may lead some consumers to discover nearer home sources of coal equally well suited to their purposes reduction in marketing costs is a reform so close to the consumer that lie he should be able to find for himself whatever relief is possible professor mead of the university of pennsylvania is authority for the statement that the delivery of coal is costing the dealers 50 cents a ton more than is necessary value of coal in the ground there only remains therefore the first item of all the value of the coal in the ground or rather the return which the landowner is asking for this natural resource the e fortunate holder of coal land whether a very human individual or a soulless soulless corporation po ration or a large trust estate administered for benevolence only is likely to endeavor to get all that the traffic ic will bear especially ally in the possession of a limited resource like anthracite the tendency has been and will continue to be to increase royalties as the years pass and the only penalty imposed by the state for high royalties seems to be high taxes which too often indeed serve to justify the high resource cost put upon coal in the ground finally in considering royalty rates or depletion charge we must not overlook the interest that accumulates throughout the period between the purchase of the coal land and the removal of the last ton of coal in placing a value upon the choctaw lands some years ago the geological survey figured the aggregate royalties at current rates as but if that amount of royalty were to be collected through the six or seven centuries required for mining the two thousand million tons under this land the present value of the land would be only if purchased by the federal government or only if purchased by the state of oklahoma and even less if the project were financed by a corporation po ration that would need to issue 6 per cent bonds such is an illustration from actual experience in coal land valuation the or invested in these oklahoma coal lands now would require a final return of in royalties to balance the account Cush ings figures more recently mr gushing cushing the editor of black diamond has figured the cost of a monopolistic control of the available coal resources east of the rocky mountains on the basis of the united states geological survey estimate of two million tons at a valuation of coal in the ground of only 1 cent a ton which as lie he stated is less than has been paid for large holdings this deal would require a capitalization of and the fixed charges on the bonds of this united states coal corporation would require an interest charge alone of 2 a ton against a production of millions tons a year mr air gushing cushing character characterizes 1 zes sue such 1 i a f financial undertaking in mild terms as hopelessly impossible and yet his figures which do not include taxes are most enlightening as affording some measure of the cost of possessing an undeveloped resource incidentally ci these startling figures furnish a strong argument for the present policy of the national government in retaining ownership of the public coal lands at least up to the time when the market conditions justify the opening of a mine and then either leasing or selling a tract only large enough for that operation the consumer of the next century simply cannot afford to have private capitalists invest to today d ay j in n coal land for their great grandchildren to lease the burden that seems evitable under unregulated private ownership of a natural resource like coal is that because the lands containing these national reserves of heat and power are taxed and because the individual or corporation properly charges up interest at current rates on his large holding the consumer must pay a resource cost which takes into account the long period of un development even the high rates of royalty on the lands of the girard estate may be found less excessive than they seem if a cent taxes and interest charges are figured yet the fact remains that the royalty for anthracite represents a much larger proportion of the cost of the mined coal than any bituminous royalties moreover we believe the highest royalty prevailing in the anthracite region has far more influence in fixing the price than the lower rates of the older leases what fixes the price any study of costs in the coal industry finds its point in the question not who but what fixes the price of coal the cost of mining coal like the cost of living is increasing exact mining costs however cannot be determined until the operators have their reform of standardizing accounting too often the operator includes in his account only the two largest and most obvious items labor and material thus when the market for bituminous coal is dull the company whose lands costs little or nothing is able to set a lower limit of price than the company whose coal must stand a charge of 5 to 10 cents per ton or even more be that charge called royalty depletion or amortization at such times the operator with the larger resource cost must sell at a real though not always recognized loss but of course with the hope of recouping himself at times of high prices like the present if fortunately lie he has any coal to sell not already contracted for even with the average low resource cost of bituminous coal the state of competition that is tied up with idle and half worked mines results in an average total cost that is little below the average selling price of course in this business there are those both large operators and small who make a profit profet in lean as well as in fat years just as there are those for whom the prosperous years are too infrequent to keep them out of the hands of receivers costs in anthracite fields higher in the anthracite fields the mining costs and especially the resource costs are higher but here with an average market demand that normally exceeds or at least equals the available supply and with the passing years this disparity must be expected to increase there results naturally a lack of competition for the market even clemens tl emens s agreements are re unnecessary as long as every operatic opera operator tir can reasonably expect to sell his product and the market price of anthracite at the mine must therefore tend to be fixed by the operator who has the largest mining and resource cost rather than by his neighbor who may be doubly favored with a mine less expensive lease less exacting in terms to work and a confessedly this analysis of the cost elements that enter into the price of coal emphasizes our lack of specific facts which can be supplied in the future only through installation of uniform cost keeping methods and uniform and improved accounting systems to quote from the declaration of purposes of the pittsburgh coal producers with the results of such bookkeeping in hand more definite reply can be made to the publics appeal for relief from high prices yet even now it may be possible to suggest how that relief will eventually be obtained study of present conditions in the coal mining districts fails to encourage the idea of governmental operation of the coal mines in this country more in line with the trend of public sentiment in the last decade however is governmental control in the interest of the consumer by regulation of prices and to judge from the facts of experience in the regulation of transportation of other public utilities the public coal commissions will be given sufficient discretionary powers to safeguard the interests of producer and consumer alike and even mandatory requirements either legislative or executive will be subject to judicial review competition fails to benefit competition seems to have failed of late years to benefit the consumer of coal in the bituminous fields the competition whenever present has been wasteful and in the anthracite fields there has been practical absence of healthy competition and whether too great or too little competition the result is the same to increase the actual cost of bituminous coal by saddling the industry and its product with the fixed charges on idle or semi idle mines and to raise the price of anthracite coal by favoring the burdens of high resource costs in estimating the aggregate losses incurred by society by reason of the large number of mines not working at fully capacity the facts to be considered are that the capital invested in mine equipment asks a wage based on a year of days of twenty four hours while labors year averaged last year only days in the anthracite mines and only days in the bituminous mines with only five to eight hours to the day As coal is more an all interstate than intrastate commodity any regulation of prices needs to be under federal control and to benefit both consumer and producer such control cannot stop with transportation and mining costs but must stand ready to exercise full rights as a trustee of the people over the coal in the ground the private owner of coal land which derives its real value from socie tys needs has no more sacred right to decide whether or not that coal shall be mined when it is needed by society or to fix an exorbitant price on this th indispensable national resource than th coal operators have to combine for the pur nur pose of exacting an excessive profit fron from the consumer or the railroads to charge all that the traffic may bear the proposal to bring land owner under the same rule as mine operator and coal carrier may seeni seem radical but where is the point at which coal becomes the resource upon which in du society depends for its very life public regulation however will be fair and indeed in the long run will prove bene facial to the land owner as well as the consumer to the mine worker as well as to the operator because any such agency as the federal trade commission in its control of prices must determine costs and as we interpret the present attitude of the whole coal mining industry the operators are willing to rest their case on a fair determination mi nation of actual costs on which their profits may then be figured |