This chapter is divided into two parts which, in some respects, are interconnected. In the first part of the study I analyze certain aspects of entry conditions in coal mining. I determine capital costs associated with entry into conventional coal mining operations and pay particular attention to capital costs required for coal mines used to supply coal gasification plants. I determine the implications on the ease of entry into coal mining from these capital requirements. Also I study cost and productivity data to determine the extent to which scale economies exist both in underground and in strip mining. The extent to which they exist bears on entry conditions in the industry.

The second part of the study looks at some implications for the coal industry of a potential massive shift toward the use of low sulphur coal to meet possible restrictive air pollution standards. Since much of the country's low sulphur coal is likely to be used as feedstock for coal gasification plants, the second part of the study is intertwined with the first. Furthermore, since ownership of low sulphur western coal differs from ownership of eastern coal reserves (where most coal mining currently occurs), a shift toward western coal mining has interesting market structure implications which this study analyzes.

ENTRY CONDITIONS IN COAL MINING