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Management Side
The Final Word by Chuck Swann
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Back in the day--the days of the early 1970s, to be exact--communications guru Marshall McLuhan popularized "distant early warnings" as one way of looking at what the future might hold for western society. The DEW Line, America's string of radar stations across Canada, was meant to give North America "distant early warnings" of incoming missiles. McLuhan's thesis was that many little-noticed happenings were often warnings of greater happenings to come. The closure of the last deep coal mine in Britain may be just such a shot-across-the bow of North American coal mining. While open-pit coal mining is continuing in Britain, miners will no longer go underground to dig it out. Is mining in America likely to follow suit?

It is already glaringly obvious that deep-shaft coal mining in North America is in steep decline under the impacts of the economics of scale (compared to open-pit mining), strong international environmentalism and plentiful, cheaper and less-polluting natural gas. (Peabody Coal, one of the largest producers, had a bad year in 2013, losing $525 million in competition with gas.) These factors portend potentially two levels of meaning for the pulp and paper industry.

First, pulp and paper mills that burn coal to generate electrical power are not likely to be able to do so indefinitely. Environmentalists will come after them when they think it is time to move on to other targets after having made their point with electrical power generating companies. Mills will face increasingly strong pressures to convert from burning coal to burning gas. The changeover will be expensive.

Second, America currently gets about 40% of its electricity from the burning of coal by utility companies. That is not likely to continue indefinitely. Not only environmentalists, but the US government, intend to see that it does not. Will natural gas pumping remain cheaper than coal mining under supply-and-demand pressures? In the long run, economics will not be the deciding factor; it will be air quality. Mills that purchase power should be busy now examining all the cost-benefit scenarios.

Big changes are coming. All the distant early warning signs point to it.

Chuck Swann is the senior editor of Paperitalo Publications. He can be reached by email at chuck.swann@taii.com.
 

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