Parent or Controlling Company Mead Corporation American Smelting & Refining Mountain Drive Coal Co. North American Coal Corp. Ohio Coal & Construction Standard Oil Co. (Ohio) Primary Field or Parent or Controlling Co. Other Metal Other Oil Coal Other Oil Steel Coal RR Other Coal Utility Oil Steel Coal Utility Oil Steel Scotia Coal Co. Other Union Carbide, Ferroalloys Div. Chemical United Electric Coal Co. United States Pipe & Foundry By letter dated October 4 Mr. Hochberg and I forwarded to you a copy of "An Economic Analysis of Price Increases in the U. S. Coal Industry" prepared by Professors Bennett and Barth. As is reflected by the enclosed October 24 letter from them, their economic analysis is supplemented and updated with respect to data relating to cost increase referable to mine health and safety regulations and black lung legislation. I will much appreciate your calling these supplemental data to the attention of your staff members who received the original economic analysis. Sincerely yours, With Brday Worth Rowley WR:md Enclosure cc: Professor James T. Bennett Professor James R. Barth THE GEORGE WASHINGTON UNIVERSITY Department of Economics / 2201 G Street, N.W. / Washington, D.C. 20006 / (202) 676-6150 October 24, 1974 Mr. Worth Rowley Rowley & Scott 1730 Rhode Island Avenue, N.W. Washington, D. C. 20036 Dear Mr. Rowley: In the study entitled "An Economic Analysis of Pricę Increases in the U.S. Coal Industry" which we prepared for you, it is pointed out on page II-26 that the cost increase due to mine health and safety regulations was estimated in 1971 to be between 20 and 40 cents per ton. It has just been brought to our attention by a municipal utility which conducted a recent study to determine the cost impact of these regulations that the estimate cited by us is too low. Instead of the 20 to 40 cent per ton figure which we employed, the study conducted by this. utility suggests that a more current figure would be on the order of $2.00 to $4.12 per ton. (These figures also include the cost increases due to black lung legislation.) Because these figures are based upon a very small sample of coal companies, it is difficult to determine the extent to which they are. representative of the cost impact of all firms within the industry. Moreover, it is not possible to assess the extent to which these cost increases are due solely to attempts to meet health and safety and black lung regulations. Assuming the validity of these new data, we still believe that the conclusions drawn in our report are valid. A once-andfor-all increase in cost incurred in meeting new regulations can explain part of a one-shot increase in the price of coal, but cannot explain the recent continuing increases in coal prices. In any event, price increases have been much greater than these costs based upon these new figures. |