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Monday, March 30, 2015 10:06 AM ET
Latest numbers suggest unionized coal mines safer, more productive than nonunion operations
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About This Feature
Data feature produced by S&P Global Market Intelligence research groups in cooperation with the news department to highlight emerging trends and topics of interest.

Editor's Note: This article was amended at 3:15 p.m. ET on April 23, 2015, to correct the labeling of injury data used. The data, collected from the U.S. Mine Safety and Health Administration Form 7000-1, includes reportable accidents, injuries and illnesses. Previously, the article implied the data included only injuries.

Data analyzed by SNL Energy suggests that underground coal mines in Appalachia that have unionized are not only safer but also more productive.

By combining the past two years of health and safety data from the U.S. Mine Safety and Health Administration and union status data from the U.S. Energy Information Administration, SNL Energy found that unionized underground mines in Central and Northern Appalachia produced about 94,091 tons of coal for every reportable accident, injury or illness in 2013, compared to 71,110 tons at nonunion mines. In 2014, the gap was narrower at 79,001 tons at union operations, compared to 76,087 tons per reportable incident at nonunion operations.

SNL Energy's analysis looked at all active underground coal mines in Central Appalachia and Northern Appalachia, comprising 16 union and 241 nonunion mines in 2014, and 18 union and 308 nonunion mines in 2013. All underground production methods were included in the analysis.

Underground union mines in the region produced more tons for every reportable incident despite research suggesting that unionized miners are more likely to report injuries that have occurred on the job. A 2012 study authored by Stanford University labor regulation expert Alison Morantz found that unionization is associated with a 13% to 30% drop in traumatic injuries and a 28% to 83% drop in fatalities. She concluded that unionization tends to predict higher total and nontraumatic injuries in the data she analyzed from 1993 to 2010, suggesting that injury reporting practices differ between union and nonunion mines.

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"Interestingly, the union safety effect on traumatic injuries seems to have escalated just before the turn of the millennium," Morantz wrote. "I propose several possible explanations for this trend, including an overall improvement in labor relations since the 1970s, fluctuations over time in the stringency of MSHA's enforcement scrutiny, the growing competitive pressures faced by union leaders, and the increasing sophistication and professionalization of [United Mine Workers of America] safety programs."

Of the 16 fatalities charged to the coal industry in 2014, only one was at a union operation. That fatality occurred when a miner was struck by a piece of underground equipment at Patriot Coal Corp.'s Highland 9 mine. Just a few weeks after the incident, Patriot announced it was closing Highland 9, leaving Kentucky without any union coal mines.

SNL Energy's analysis also found that underground union mines produced more coal per man hour. In 2013, the average coal produced per employee hour at Appalachia's underground coal mines was 3.60 tons at union operations and 3.08 tons at nonunion operations, making miners about 17% more productive at union operations. In 2014, underground union coal mines produced approximately 4.09 tons per man hour, while nonunion operations produced 3.54 tons per man hour, indicating about 16% higher productivity at union operations.

While SNL Energy's analysis found that union underground mines in Appalachia generally were more productive based on tons produced per hour, it does not account for the cost of each ton produced, a metric not widely reported at a mine-level basis. That cost-per-ton measure could potentially be higher at union mines due to negotiation and legal costs that would not affect productivity measures, or other factors.

One explanation for the higher productivity levels at union mines, at least one study proposed, is that unions tend to pick more productive mines to organize.

"The aspect of mine heterogeneity that we focus on is the width of the mine's seam of coal," says the abstract of a study published in Applied Economics and written by St. Lawrence University economics professor Brian Chezum. "Wider seams increase productivity. Empirically, we find that unions disproportionately organize mines with wider seams and this accounts for the positive relationship between unions and productivity observed in our data. In fact, once seam thickness is accounted for, the estimated effect of unions on productivity is negative."

Within the industry as a whole, the picture is slightly different as there is a clear pattern that the average union mine is increasing in employees while producing fewer tons of coal, while coal employment has generally increased roughly alongside production totals at nonunion operations. This is likely due to the higher productivity associated with surface mines and mines in the more geologically favorable Illinois Basin and Powder River Basin, where unionization has historically been less common.

'Night and day'

"The union was formed 125 years ago by miners seeking to improve their pay and working conditions, including making the mines safer places to work," said Phil Smith, a spokesman for the UMWA. "Those needs still exist today. [SNL Energy's] data demonstrates that union mines are safer mines; others have found similar results. People say that nonunion miners make just as much, if not a few dollars more, than union miners do. But that's only because the union is around to set the pay scale."

Smith said nonunion mines lack the level of health care and retirement benefits, a right to avoid hazards without fear of retaliation, access to safety committees working to improve safety conditions and grievance committees to ensure fairness at work.

You work in a nonunion mine, you pretty much do what you're told to do, including risking life and limb, or else you're going to lose your job.
  –– Tony Oppegard, mine safety advocate and Kentucky attorney

"We believe good pay is still necessary," Smith said. "We believe decent benefits are still necessary. We believe making mines as safe and healthy workplaces as possible is still necessary. We believe workers being treated fairly and with respect is still necessary, and we believe the ability of miners to retire with dignity is still necessary. The union is what makes all those things possible."

Smith said the UMWA represents about 25% of hourly workers in the coal industry right now — a rate he said is still about 3.5 times higher than average private sector unionization rates in the U.S. He said the UMWA also represents members outside of the coal industry and added that membership is holding pretty steady, if not growing, in the last few years. He said it is difficult to organize unions at operations today and that operators are "hostile to unionization of mines no matter what market conditions are."

"Employers are willing to break the law to intimidate workers into voting against a union, knowing that it will be years before any penalty is assessed and that whatever it is will be just a cost of doing business," Smith said. "That said, we are talking to miners all the time about organizing and have several active efforts underway."

Tony Oppegard, a Lexington, Ky., attorney who specializes in representing coal miners challenging their employers, said there are "really only two lawyers" in the U.S. that specialize in miner discrimination cases and while he gets frequent calls from miners across the country, he is basically limited to working in the Kentucky area.

When a miner is at a nonunion mine, Oppegard told SNL Energy, he is an at-will employee, and the lack of protection provided by a union contract closes down many of the options to improve safety conditions that are open to union miners.

"If the union is diligent at a particular mine, it's like the difference between night and day," Oppegard said.

Oppegard said that despite the Federal Mine Safety and Health Act of 1977 providing for protections and rights for all miners, the intimidating process of filing a discrimination complaint often means coal miners are afraid to report safety conditions or other discriminatory matters.

"You work in a nonunion mine, you pretty much do what you're told to do, including risking life and limb, or else you're going to lose your job," Oppegard said. "That's why companies want to be nonunion. They want more control over the workforce."

At a union mine, Oppegard explained, a safety committeeman is elected by the miners and appointed to deal with safety and health issues internally. When a miner reports a concern, the committeeman works to resolve the issue before moving forward in the grievance process, including contract arbitration hearings not available to nonunion workers.

"At a nonunion mine, they don't have that same cushion to try to resolve issues at the job site," Oppegard said. "If a miner at a nonunion mine refuses a work order because he thinks it's unsafe and he's disciplined for that, whether it's a discharge suspension or being sent home for the day or given a worse job, his only recourse is to file a discrimination complaint."

At a time when costs are a serious concern due to the price of our product, any additional costs in an organized workforce would be a concern, especially in a competitive market.
  –– Bill Bissett, president, Kentucky Coal Association

Once filed, Oppegard said, MSHA has 90 days to respond to the complaint. While many operators say those protections are enough and that coal mining is now safer than ever, Oppegard challenges those who think the union has outlasted its purpose.

"Industry has been saying that for the last 35 years," Oppegard said. "It's a never-ending mantra from industry that safety is our top priority and all that. It's a PR slogan."

Instead, Oppegard said, many operators are simply focused on production at all costs.

"Miners call it smothering," Oppegard said. "That's the never-ending insistence on production. Miners will say, 'That man smothers me every day.' He's always on me for production. Produce. Produce. Produce. And foremen who are smothered and are willing to cut corners on safety don't want to hear safety complaints."

Oppegard said Kentucky's move away from unionized coal mines stems from the difficulty of organizing. He said that while companies can host mandatory union-busting meetings at the mines, the union has the challenge of selling the union with no such ability to compel attendance. He said a generation of miners is growing up nonunion and that "what is preached in the mines" is that the unions are bad and will do little but take the miners' money.

"They have to sit and listen to a propaganda talk," Oppegard said. "The union can't do that. They can't require anyone to come to a meeting. … It's a very easy sell to tell employees: 'Look, the odds of our mine closing is much greater if it's a union mine.' Miners are just afraid to take that risk."

Smith said the advantage in productivity is likely a function of union mines' tendency to have less turnover than nonunion mines.

"They know their mine, they know their equipment, know how to best run coal in that mine. Workers in many nonunion mines today are actually contractors who are not employees of the company that owns the mine," Smith said. "They move around from mine to mine, never getting settled in at one place."

Oppegard said he thinks it is just common sense that when a worker is invested in work and not unhappy with the conditions in the mine, productivity is going to go up.

"It's proven that a safe mine is a productive mine, but a lot of nonunion mine operators don't look at it that way," Oppegard said. "They think it takes longer to produce coal if you're concerned about safety. It's just a backwards way of looking at running mines, I think. … [As a nonunion miner] you're basically on your own and hoping and praying that your co-worker might stand up for you and tell the truth. It can be difficult at nonunion mines because people are so job-scared."

Cost and risk

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Bill Bissett, president of the Kentucky Coal Association, said the coal miners he has talked to tend to take on "more of an independent perspective" when it comes to modern coal employment. He said coal miners today — union and nonunion — are paid well, have excellent benefits and are often in high demand.

Bissett said state and federal safety hotlines and internal safety reporting systems have largely replaced the need for organizations like the UMWA.

"You also have a political direction at the UMWA that I think in many cases is out of step with coal miners and even their membership," Bissett said, noting the UMWA's inclination to support Democrats "regardless of their position on coal."

He said that actions such as the 2008 endorsement of President Barack Obama and the support of Alison Grimes in the U.S. Senate race with Mitch McConnell, in which many Kentucky coal counties ultimately went to McConnell, has dinged the union's credibility in the state. In addition, Bissett said companies may be hesitant to take on the potential additional costs that can come with union representation.

"At a time when costs are a serious concern due to the price of our product, any additional costs in an organized workforce would be a concern, especially in a competitive market," Bissett said. "I also think people who are working underground and at the surface would want to take home as much money as they can without paying to an organization that they often have political and cultural disagreements with."

The corporate line

The union status of a mine is often considered a risk to production, a notion many companies even include in the "risks related to our business" section of their Form 10-Ks filed with the SEC. The risks of the coal business are particularly challenging given the current state of coal markets, and many companies have strained financial positions.

Alliance Resource Partners LP is a union-free business with operations in the Illinois Basin and Appalachia.

"If some or all of our currently union-free operations were to become unionized, it could adversely affect our productivity and increase the risk of work stoppages at our mining complexes," Alliance warned investors in its most recent Form 10-K. "In addition, even if we remain union-free, our operations may still be adversely affected by work stoppages at unionized companies, particularly if union workers were to orchestrate boycotts against our operations."

The same warning can be found in filings of the nonunion Foresight Energy LP, another company that has posted impressive cost of production figures. Alpha Natural Resources Inc. listed its ability to negotiate contracts with the UMWA, increased unionization of its workforce and potential for strikes as a business risk in its recent earnings results.

Alliance, one of the few producers that has continually posted record financial results quarter after quarter, says in its SEC filings that one of its strengths is its nonunion workforce.

"Unlike many of our competitors in the eastern U.S., we employ a totally union-free workforce," Alliance wrote. "Many of the benefits of our union-free workforce are related to higher productivity and are not necessarily reflected in our direct costs."

The story of Patriot Coal's bankruptcy may illustrate some of the fears of the coal industry regarding unionization. Patriot was spun off from Peabody Energy Corp. — bundling its union operations in the eastern U.S. into its own entity.

A few years later, Patriot filed bankruptcy, largely citing the weight of liabilities associated with its large union workforce. Peabody executives said at the time that the spinoff would reduce its legacy liabilities by roughly $1 billion and lower its spending by about $100 million, cutting the company's total legacy liabilities in half.

Patriot was later reorganized as a private company and has since had to idle several of its mines.

Peabody has one surface mine in the U.S. represented by a union. The company's Australia operations are primarily union. Peabody said in its latest Form 10-K that current labor relations with its employees are "good."

"Relations with our employees and, where applicable, organized labor are important to our success," Peabody said. "If some or all of our current non-union operations were to become unionized, we could incur an increased risk of work stoppages, reduced productivity and higher labor costs. Also, if we fail to maintain good relations with our union workforce, we could experience labor disputes, work stoppages or other disruptions in production that could negatively impact our profitability."

One of the most outspoken critics of coal mine unionization was former Massey Energy Co. CEO Don Blankenship, who faces three felony counts related to an explosion that killed 29 miners at Massey's nonunion Upper Big Branch mine. Blankenship, who was accused of ordering employees to "run coal" at the expense of safety, authored several essays critical of the UMWA and MSHA.

"Like the union, [MSHA's] policies today are clearly not designed to improve the health and safety of coal miners," Blankenship wrote in an essay shared on his website. "This has been the UMWA's culture since at least the 1950's. The UMWA's control over coal operators was so absolute and fear-based that hardly anyone dared to even open a non-union mine in Appalachia for more than 40 years."

About the data: SNL Energy conducted this analysis by combining U.S. Mine Safety and Health Administration data on productivity, production and reportable incidents for 2013 and 2014 with union and nonunion status data from the U.S. Energy Information Administration. The analysis considered only coal mines in the Central Appalachia and Northern Appalachia basins. While surface coal mines were excluded from this analysis due to clear variation in employment to production ratios, the analysis does not separate and analyze how these trends may vary across mining methods such as union versus nonunion performance of longwall mines.

Article updated at 3:00 p.m. ET on March 31, 2015, to include an "About the data" section that provides additional information about the data used in the analysis. Article updated at 6:00 p.m. ET on March 31, 2015, to clarify the number of active underground mines included in the analysis.
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