Incentives for coal industry expected to bring jobs and investment to Alabama

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Sometime next month, 10 men will sit down in a Birmingham conference room and decide the fate of thousands of people and the direction of an economy and environment for more than a generation.

They are the directors of Birmingham-based Walter Energy, one of the nation’s largest miners of coal, scheduled to conduct an April board meeting. The company has about $1 billion to invest in its future and it comes down to a simple choice for the board members: allocate the capital to build a new coal mine in Alabama, or spend it on a new one in British Columbia, Canada.

Walter’s Alabama project has been whispered about for years, a behemoth underground mine in northern Tuscaloosa County that would take five years to get to full production, cost $1.1 billion, employ 500 miners earning an average salary of $90,000 a year, and last for about 40 years. It is expected to produce as much as 4 million tons a year, a fifth of the state’s current output, a bounty of metallurgical coal for export to overseas steelmakers.

The project has also attracted stiff opposition from environmental groups, who say it will pollute the already contaminated Big Yellow Creek. But the odds of Alabama being chosen improved this month when Gov. Robert Bentley signed into law legislation providing tax and other economic incentives for coal mine investment. The law allows coal companies to apply for tax breaks on sales, use, mortgage, deed and noneducational property levies. There is also a 5 percent income tax credit for companies that invest more than $1 million in the coal industry. The incentives don’t materially differ from those that have been available to other industries for decades.

“It is hoped the passing of the legislation will be instrumental in gaining our company’s investment for Alabama,” said Dennis Hall, a spokesman for Jim Walter Resources, the underground coal mining unit of Walter Energy.

Folks in the coal industry hope the law will spur spending and employment far beyond the Walter project. Alabama Rep. Bill Roberts, R-Jasper, sponsored the bill. He said Walker County has many shuttered small and geologically difficult mines that will be under consideration for redevelopment now that the incentives exist.

Decades ago, he said, Walker County mines supplied Alabama Power’s electricity plants with coal burned to generate steam. Now, surface mines in Wyoming can produce coal so cheaply and in such quantity — more than 400 million tons a year — that it is still cheaper for utilities as far away as Alabama to ship it in than to buy locally. That might change with the incentives, Roberts said.

“With today’s economy, we need all the jobs we can get,” he said.

Not everyone is so enthused. The Black Warrior Riverkeeper, a nonprofit environmental group, says discharges from the Walter mine will harm the already polluted Big Yellow Creek, a tributary of the Black Warrior. The group’s Nelson Brooke said protests over coal mine development in the area have already been filed, and that the Black Warrior basin is already home to 95 coal mines. Too many of them, he said, are being allowed to operate too close to waterways.

“These are hard incentives to understand,” Brooke said. “Why does our legislature have to give tax breaks to a very wealthy company in the name of job production? Why does Walter need handouts?”

Walter is a large company, with revenue last year of $2.5 billion and profit of $349 million, a longtime player in an Alabama coal industry that has been little changed for many years. Alabama’s mines have been producing about 20 million tons a year for many years, usually good for about 15th among the states nationally, but far behind the leaders. Employment has been steady in recent years at about 4,700 jobs, from dozens of surface mines and six to nine underground ones, depending on which has been shut down for whatever reason and which has reopened.

Coal companies

Here is a look at the leaders, from statistics compiled by the mining and reclamation division of the Department of Industrial Relations:

*Jim Walter Resources, the Walter Energy unit, operates two mines in Tuscaloosa County and one in Fayette County. They include the state’s biggest, the No. 7 mine 2,000 feet underground in Tuscaloosa County. It produced 3.5 million tons last year. About 2,000 miners work for Jim Walter in Alabama.

*Drummond Co., based in Birmingham and dating to the 1930s, operates the Shoal Creek underground mine in west Jefferson County. Shoal Creek employs 642 people and produced 1.9 million tons last year. A company owned by members of the Drummond family is seeking permits to operate a surface mine along the Black Warrior River in Tuscaloosa County, a drinking water source for 200,000 people, drawing the ire of the riverkeeper.

*The Oak Grove underground mine in western Jefferson County is owned by Ohio-based Cliffs Natural Resources. It employs 530 people who produced 804,000 tons last year.

*The Twin Pines Coal operation in Jefferson County known as Shannon No. 2 is the state’s largest surface mine, producing 860,000 tons last year. Surface mining is simpler than underground, so the mine employed 138 people. But many surface mines last year produced more than 100,000 tons. All told, surface operations last year accounted for about 40 percent of the state’s coal production and about 33 percent of employment.

But the big prize now for the industry is the Jim Walter project. If it goes through, the additional four million tons of production per year will tax the coal export docks in Mobile to their limit, said Hall, the Walter spokesman. Much northern Alabama coal finds its way there via rail or barge for international export via the McDuffie Coal Terminal.

Walter, Hall said, plans to spend an additional $110 million for its own coal terminal, if the board allocates the capital spending to Alabama come April.

“There are much wider implications from the coal incentives for almost everyone in the state,” Hall said.

The Birmingham News- March 11, 2012
by: Russell Hubbard
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