growth rates are impressive, the higher growth rate in Wyoming may reflect differences in labor
incentive structures, workplace rules, and technology adoption.
Another key factor contributing to PRB coal competitiveness is an efficient rail transportation
network. In 1980, the U.S. Congress passed the Staggers Rail Act that deregulated the railroad
industry. Prior to passage, rail rates were linked to tariffs regulated by the Interstate Commerce
Commission. After passage, railroads could charge their own tariffs and began to compete for
business by setting competitive rates. After the early to mid-1980s, average rates for coal
transportation declined steadily. In Figure 13 regional coal transportation rates are reported from
1979 to 2010 for coal shipped from Appalachia, Illinois, and the PRB. Coal transportation rates
for PRB coal declined 45% from 1979 to 2010 while rates increased 30% and 54% respectively
for coal shipped from Appalachia and Illinois (see Figure 13). Recent increases in PRB freight
rates; however, have undermined PRB cost-competitiveness.
Figure 13 : Coal Transportation Rail Rates by Region, 1979 -2012
Higher productivity and lower transportation costs contributed to a trend of declining real prices
for coal in the U.S. from the late 1970s through the first few years of this century, see Considine
(2013). Prices for bituminous and sub-bituminous coal are plotted in Figure 14 from 1979 to 2011.
Wyoming coal is primarily sub-bituminous coal so prices for this grade reflects trends in PRB coal
prices. The first notable feature of this time series plot is the wide differential between prices for
bituminous and sub-bituminous coal. These price differentials are consistent with a competitive
market in which prices reflect productivity and cost differences between regions. Early in the
sample, sub-bituminous coal prices were about 40% of prices for bituminous grades. Towards the
end of the period, prices for sub-bituminous grades were only 27% of bituminous prices. This price
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1979 1990 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
2012 dollars per ton
Appalachian Illinois Powder River Basin
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