The 2nd meeting of the Subcommittee on Natural Resources of the Interim Joint Committee on Agriculture and Natural Resources was held on Wednesday, October 8, 2008, at 10:00 AM, in Room 131 of the Capitol Annex. Representative Keith Hall, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Ernie Harris, Co-Chair; Representative Keith Hall, Co-Chair; Senator David E. Boswell; Representatives Hubert Collins, Jim Gooch Jr., and Tanya Pullin.
Guests: Commissioner Carl Campbell, Department of Natural Resources; Johnny Greene, Office of Mine Safety and Licensing; Bill Caylor, Kentucky Coal Association; Joe Jacobs, Jacobs Risk Management; Paul Corbin, Corbin Mining; David Gooch, Coal Operators and Associates; and Bruce Williams, Kentucky Conservation Committee.
LRC Staff: Stefan Kasacavage and Kelly Blevins.
Representative Hall called the meeting to order. A quorum was not present. Representative Hall invited all of the guests to the table to discuss changes in the implementation and enforcement of mine safety law made by HB 207 of 2007.
Mr. Caylor began with a power point presentation on coal production and mine safety in Kentucky. He stated that Kentucky ranked 3rd nationally in coal production behind Wyoming and West Virginia. Coal also accounts for 93% of Kentucky’s electricity production and contributes to Kentucky’s relatively low cost of electricity – 5.43 cents/kWh, 4th lowest in the United States. 17, 893 people are employed as coal miners in Kentucky making an average of $58,600 per year. Mr. Caylor continued his presentation with Kentucky mine safety statistics. Mine fatality rates continuously fell throughout the 20th century, from around 160 average annual fatalities in the early part of the century to around 12 average annual fatalities at the end. In 2007, for the first time since 1890, there were no underground fatalities and only 2 surface fatalities. There have been 4 coal mining related fatalities to date in 2008 in Kentucky, 3 surfaces and 1 underground.
Mr. Caylor closed his remarks by discussing the major impacts of HB 207 on the mining industry. Among the major impacts he listed were: all electrical work must be performed by a certified electrician, two medical emergency technicians (METs) must be onsite for underground mines, six additional hours of retraining for mine foreman were mandated (he stated that there were already 16 hours of retraining mandated, which was 8 hours more than any other state in the nation), the mine fan must be in continuous operation, which could have a negative effect on small mining operations where it would be necessary to shut the mine fan off from time to time, and duplication of many MSHA duties such as roof control plans, mine seal construction plans, and electrical inspections. Mr. Caylor’s suggestions for improving mine safety conditions included focusing on “behavior modification” – observing a miner working onsite and teaching him/her safer working techniques and getting away from duplicative safety requirements that are already in effect under MSHA.
Representative Pullin commented that coal was not mined in her district, but that her district did benefit from coal production through lower electricity rates and the transportation of coal. She asked how competition from coal produced outside of the United States affected coal prices within the state.
Mr. Caylor responded that a large amount of coal was being imported mainly from South America to the southeastern region of the US, which created competition for Kentucky coal in that market. The coal produced in those countries could be provided at a lower cost because of the lax safety and environmental conditions under which it was produced.
Representative Pullin then asked what it meant that surface mining was 27% more efficient than underground mining. Mr. Caylor responded that 27% more tons of coal per worker were produced through surface mining.
Senator Boswell complemented the presentation and asked Mr. Caylor about why Kentucky had fallen from the lowest electricity costs in the nation to fourth lowest. Is it the cost of regulation? He also asked what impact the initiatives passed in House Bill 1 of 2007 on coal to liquid issues had on Kentucky coal.
Mr. Caylor responded that Kentucky was in competition with states that relied on hydroelectric power, which provided more consistently low electricity costs. Additionally, we are competing with Wyoming and West Virginia, which are the two states that produce more coal than Kentucky.
On coal to liquid, the technology has been around a long time, and if we pursue it as an energy source, it could produce liquid fuel at a price of around $1.50 per gallon plus taxes. This development would not reduce the price of gasoline, although it would help stabilize cost increases in the future. Electric hybrid cars are the most promising development for the use of Kentucky coal in the future. A serious commercial-sized coal to liquid plant would require an investment of $4-6 billion, and until we can guarantee the price of the fuel, it will be difficult to convince someone to build such a plant. Mr. Caylor believes that the demand does exist from the US Air Force to purchase large quantities of fuel produced by a coal to liquid plant.
Senator Boswell commented that the Illinois Basin was one of the locations proposed by the US Department of Defense for a coal to liquid plant. He then asked about the Clean Air Act. Phase I compliance had an impact on the Western Kentucky coal plants and that Phase II impacted the Eastern Kentucky coal fields. Have these compliance requirements increased the demand for out of state coal, such as coal from Wyoming?
Mr. Caylor responded that they had. Phase I offered utilities the option of either installing a scrubber or switching to low-sulfur coal. Most utilities chose to switch to low sulfur coal, like the kind that is abundant in Wyoming. Under Phase II, utilities have to reduce sulfur dioxide, nitrogen oxides, and particulate matter emissions. In order to do this, they have to install scrubbers. The installation of the scrubbers allows the plants to use coal with a higher sulfur content, which undermines the demand for out-of-state, low-sulfur coal that was originally imported to meet Phase I compliance. Wyoming coal still offers competition because of the low cost of production there.
Senator Boswell commented that nations importing coal to compete on the US market were not playing on a level playing field, because of the lack of safety and environmental regulation under which their coal was produced. These concerns can be applied to other imports from countries such as China where labor and environmental regulation is very lax.
Representative Collins asked if the percentage of the coal used by Kentucky utilities that was produced in Kentucky had increased, or had it decreased in the face of cheap coal imported into the state. Mr. Caylor responded that the percentage was about the same. Representative Collins then asked specifically about the coal imported from foreign countries. Mr. Caylor responded that most of that imported coal went to other southeastern states, and that there was very little if any coming into Kentucky from foreign countries. Representative Collins then asked if there were areas that had exposed coal seams as large as those found in the Powder River Basin area, like perhaps in the Illinois Basin. Mr. Caylor responded that there were not. Representative Collins then commented that few positive aspects of coal production were well reported by the media, and that they seem to focus on the more negative aspects of coal production. Representative Collins also wondered what new information the foremen could be learning from the further training requirements.
Senator Harris asked what the current spot price of coal was. Mr. Caylor responded that it was anywhere from $50-$100 per ton. Some metallurgical coal could be $200 per ton.
Senator Pullin commented that four years ago, the General Assembly passed a resolution expressing its full support for the Air Force’s Assured Fuels Initiative, and that the General Assembly continues to support it.
Representative Hall commented on the positive trend in mine safety in Kentucky and that the positive aspects of coal production in Kentucky were not reported enough. He went on to state that the MET requirements were too burdensome on small coal producers, and that there should be an exception to the requirement for small operators. Coal severance revenues are up 23%, and Kentucky needs as much of this money as it can get. However, production is being stymied by the MET requirement, especially for small producers who are having a hard time finding two METs and ensuring that they always show up onsite for every work day.
Mr. Jacobs expressed the need for common sense in applying the mine safety regulations. He stated that the Office of Mine Safety and Licensing has one of the best mine rescue teams in the US and without it the small operator would have vanished from the face of the Earth. The analyst program was a forerunner to the behavior modification program, which is one of the best things that the General Assembly passed to promote mine safety in the state. The behavior modification program allowed experienced miners to teach miners onsite safety techniques. This onsite teaching program is more effective than the current requirement under HB 207 that the foreman receive further training in a classroom. The foreman should be trained onsite by an analyst program specialist. We had a program called FACE in the past that accomplished this type of safety training.
Mr. Jacobs further stated that the requirement that two METs be onsite was just too burdensome for small operators. Practical conditions must be considered in requiring two METs to be onsite. There are not enough miners trained as METs, and the competition is too great from other operators to hire the METs that are available.
Representative Hall stated that underground miners are required to have 48 hours training. He went on to express the need for some flexibility in the MET requirement for small operators.
Mr. Greene stated his job was to enforce the law, and that the law stated that one MET was required to be onsite for a nonproduction shift and two were required to be onsite for a production shift. He tried to be as fair as possible in enforcing the law to the operators, while at the same time staying true to the intent of the law. Representative Hall asked Mr. Greene what size operator he would consider a “small operator” for the purposes of making an exception to the MET requirement, so as to require that only one MET be onsite for small operators. Mr. Greene responded that he would consider a small operator to be one that had 15 employees or less. Representative Hall then asked whether there was a difference in training between surface and underground METs. Mr. Greene responded that there was not. However, the law requires that an underground MET must be an underground coal miner. Representative Hall then reiterated his belief that there needed to be an exception in the MET requirement for small operators.
Representative Hall then suggested allowing the MET training requirement to be satisfied as long as the miner was currently participating in the certification process. Mr. Greene responded that the law required that the miner complete the MET certification training before he or she is considered an MET. Representative Hall then expressed his concern that he was recently cited for a violation for having a satellite phone as the means of external communication at a mining site instead of a landline phone. Mr. Greene responded that it was his opinion, as a matter of enforcement policy, that a hard landline phone was the most reliable form of communication in an emergency and that it was the kind of phone required by the law. Representative Hall expressed his belief that satellite phones were just as safe and reliable.
Representative Hall then asked what was the job title of a surface mine inspector with the Office of Mine Safety and Licensing. Mr. Greene responded that they were called regular inspectors, and that they inspected both surface and underground mines. Additionally, there are surface safety analysts. Representative Hall said that he heard that there was a pay discrepancy between surface inspectors and underground inspectors. Mr. Jacobs then stated that the discrepancy was between a surface reclamation and enforcement employee and an underground inspector. The surface reclamation and enforcement employee makes about $10,000 less than the underground inspector. Representative Hall stated that the statistics show that surface mining is just as hazardous as underground mining, so they should be paid the same. Mr. Greene replied that the regular inspectors are also members of the mine rescue team, whereas the surface reclamation people are not.
Mr. Campbell stated that they would be happy to provide for the increase in pay for surface reclamation inspectors, if the General Assembly would provide funding for it.
Representative Hall stated that it was important that everyone work together to increase production along with safety and that the MET requirement should be lowered for small operators.
Representative Gooch expressed his appreciation for the mine safety improvements that have been made. He went on to state that the media did not adequately report positive news stories involving coal production, while emphasizing the negative ones. He was also concerned with the more stringent MSHA enforcement that was raising costs for Kentucky operators. He feared that the increased enforcement was not improving safety conditions, but that it was increasing costs.
Representative Hall thanked the panel for the productive discussion.
There being no further business, the meeting was adjourned.