The following is a post from a financial forum I read occasionally. I offer it without comment, except to say that it should give the reader an inkling of how Appalachia came to be in its current twisted shape; for more details, read Harry Caudill’s Night Comes to the Cumberlands.
I promised to report to you on my coal mining trip. I spent the last few days in the mountians of West Virginia checking out the met coal (metallurgical coal) boom. I found myself riding in a pick-up bed, transversing narrow hairpin turns on dirt roads, trying not to look down at the ravines while dodging low-hanging tree branches. I won’t even get into the ritual of hanging out with the locals in the deep woods, shooting at beer bottles with a beretta (9mm), hoping that no one would say, “when I pull your ear, I want you to squeal like a pig”. For three days I saw no people of color in an area where a dentist would starve.
The year old Holiday Inn Express in Claypool, WV (pop. 1,700) had no vacancies. There was a lot of money there chasing met coal, and natural gas deals. The would be coal baron, who was hoping to extract my investment dollars, took me to meet a woman who lived, with her two kids, in a 500 sq ft tarpaper shack with a broken out window and no electricity. The woman, who was only in her late 20s but looked like she had lived a lot longer than that, offered to sell him her 700 acre property, with serious met coal seams, heavy hardwood timber and great natural gas well potential, for a million dollars. Most of these proven strip mines kick out 30,000 tons a month. Just a $1 royalty can make an inversor $30,000 a month for sometimes up to 10 years. The local nat gas company will drill wells that kick off other royalties. The timber is supposed to bring six grand an acre.
The night before I left, I was ready to sign up, but I still wanted to talk to the biggest met coal buyer in the area. He told me that he had paid a $300 a ton a few months ago on the spot met coal market (met coal goes for much more than steam coal). Now he was paying in the $150 to the $180 range, and, with steel production down, the spot coal market had disappeared. He couldn’t guarantee that in six months he’d only be offering $85, and that he might be forced to give someone with a current $150 contract, a haircut. Mining costs could be as much as $95 a ton.
I could fill pages writing about the partners in these deals that were suing each other, the miners who were stealing coal by the truckloads, and the town’s people who were happy enough to sell some flatlander a worthless mine, but I came away knowing that the met coal and natural gas boom was little more than a bubble, and that the air was already rapidly leaking out.