Inter-regional coal mine competition in the US: Evidence from rail restrictions

Abstract

This analysis looks at how Appalachian coal mining responds to restrictions in coal production from the Western US. An unexpected reduction in the ability to move coal from the Powder River Basin (PRB) in 2005–06 led to a reduction in the rate of Appalachian coal mine closure, no impact on the rate of coal mine openings, and an increase in the number of employees in Appalachian coal mines. On the demand side, plants in the Midwest are more likely to switch from PRB coal to Appalachian coal, using the spot market to procure this coal, which is costlier and of lower quality. The results imply inter-regional coal mine substitution possibilities and shed light on the tradeoffs inherent in policies that impact production in one region.