B.C. coal producers’ losses foreshadow mine closures

The financial fortunes of British Columbia’s coal producers moved from bad to worse in 1991, with losses before extraordinary items topping $62 million. This compares with a loss of $4.1 million before extraordinary items in 1990.

The British Columbia Coal Association highlighted its annual review in red ink, exemplifying the industry’s woes.

Peter Dolezal, chairman of the association, warned that the provincial, municipal and federal governments must act quickly to move the industry away from the brink of collapse.

Dolezal said mine closures and lost jobs are imminent, and he noted a number of key issues hampering industry competitiveness.

The first issue is one of coal use. Despite its top ranking in terms of value at $1.6 billion, coal has virtually no domestic consumption base even though it outstrips the combined value of oil and natural gas production in the province.

Dolezal said the government has failed to recognize the potential for coal as part of the province’s energy supply. And he said a coal-generated power plant in southeastern British Columbia would be a significant boon to the local economy which is in grave danger of losing high-paying mining jobs. Dolezal said Alberta coal producers supplying local power facilities are excellent examples of stable and profitable operations.

The government is not necessarily opposed to a coal-powered generating plant but has set sulphur emission standards at 0.2 lb. per BTU, representing “best possible technology.”

Jim Gardiner, an association board member and the president of Fording Coal, said the 0.2 standard boosts capital costs for a generating facility substantially, leaving current proposals uneconomic.

Gardiner said acid generation in the area is not a factor, noting that Fording probably puts more sulphur in ground in its reclamation areas through fertilizing, than that set out in the emission standards.

The national standard for sulphur emission is set at 0.6 lb. per BTU which Gardiner said could easily be met by any new facility without hurting project economics.

Taxes on rail transportation continue to be a bone of contention for coal producers.

Dolezal said the taxes are costing the industry about $27 million per year. He said rail charges in southeastern British Columbia are about 31% higher than comparable rail service in the northeastern U.S.

High levels of municipal taxes are also seen as a problem. Dolezal said many municipalities essentially supported by coal have failed to rein in spending to reflect the poor state of the industry.

Dolezal said Quintette Coal’s recent restructuring and the financial troubles currently facing Westar Mining, now under court protection from bankruptcy proceedings, are representative of the industry’s plight.

Dolezal was quick to point out that the industry is not looking for government subsidies, but relief from crippling non-profit-based taxes as well as general policy changes to promote coal use.