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Competition in the U.S. Energy Industry







economies of scale in strip mining even though productivity seems to increase with size.

In summary then there would seem to be no large economies of scale in coal mining, although there may be some small advantage to large size (over 500,000 tons a year) in meeting federal safety requirements and possibly in serving the increasingly important electrical utility industry. While this conclusion seems warranted for production units, that is, actual mines, it may be that multiestablishment companies experience savings over savings unit firms. It is to that question that we now turn, although the evidence here is less firm than on individual mine operation.

MULTIUNIT FIRMS

In 1967 census data indicates that large coal mining companies (that is, those with over 500 employees) produced 52 percent of the receipts of companies classified in coal mining, while in 1963 such large companies produced only 46 percent of the receipts. In 1967, there were 11 such companies while in 1963 there were only 7 [Enterprise Statistics, p. 424 and p. 129]. This growth in large companies took place at the same time that the number of smaller companies declined 44 percent. Thus, by the survivor technique, large companies appear to be the most economical.

Data from the 1958 and 1963 Census of Mineral Industries indicates that in 1958 only 6.7 percent of the total companies involved in coal mining were multiunit operations. But five years later, the percentage of multiunit operations had declined to 5.1 percent of the total. While there may have been a trend towards larger multiunit companies since, it seems implausible to argue that they are becoming the dominant mode, although they do produce a large portion of the coal. This suggests that multiplant economies are small in coal mining. A priori they would appear to be small. Common ownership of several mines would not produce the savings that might arise in some areas of manufacturing from scheduling of output. While there might be savings from common management, they would appear to be small.

Any gains from R&D would be greater for a large firm with several mines, but would still undervalue the gains for the industry. That is, a successful R&D program that found,for example, a cheap way of turning coal into gas or which found a cheap way to desulfur coal would have huge benefits for the industry as a whole but for a single company, unless the process could be patented, would bring much smaller gains. Thus, there would be some gains from doing R&D by large firms. As a matter of fact little R&D is done by coal mining firms.

A common selling organization may also have cost benefits for a firm but such savings are likely to be small in coal mining. Buyers are increasingly large utilities or large users who normally solicit bids for coal. A