The expected value of catastrophes in underground coal mines 1987-2001 [electronic resource] /

by Alexander, Danrick W.

THE EXPECTED VALUE OF CATASTROPHES IN UNDERGROUND COAL MINES 1987-2001 by Danrick W. Alexander, P.E. Eighteen fires, explosions, a flood and an explosives blow-out caused catastrophes during the 15 year period from 1987 to 2001 and led to significant interruptions of production. Three of these events were also disasters that caused 5 or more fatalities. The number of catastrophes per year has held steady while the number of mines has decreased. This has led to a doubling of the number of catastrophes per 1000 mine operating years from 0.77 to 1.65. This growing problem is largely unrecognized. Catastrophes are the largest, most costly single property loss events in the underground coal industry. However, because major production interruptions are infrequent and spread throughout the industry, individual companies do not have sufficient cost data to fully understand the expected value of future catastrophes. This research documents the U.S. underground coal mine catastrophe experience from 1987 to 2001 and provides an estimate of the annualized expected value or cost of catastrophes for different groups of mines. The catastrophe expected value can be used in capital budgeting, insurance negotiations or other purposes. While this research will not provide a tool to estimate the specific benefits of any one safety investment it will provide corporate planners the annualized expected value of catastrophes, which is a useful benchmark that does not currently exist, for rationalizing gross expenditure levels on catastrophe prevention or mitigation projects. On average these catastrophes resulted in the loss of 57% of a mine’s annual production and cost $10 million plus $14 per lost ton. The mean annualized expected value of a catastrophe is $35,000 for all mines. The distribution of values is related to mine size and for the largest mines (which are also mostly longwall mines) the annualized expected value is $500,000. Small mines are so numerous and catastrophes are reported so infrequently that the probability any one small mine will have a catastrophe is much less than 1% which makes the expected value very small. Large mines could justify spending a portion of the one half million dollars per year to reduce the likelihood of catastrophes based on this research.