West Virginia Coal Industry $100 Million Budget Drain, Report Says

Mining is costing taxpayers more than it contributes, and trend expected to worsen

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Coal mining in West Virginia drained the state budget of nearly $100 million in 2009, policy experts said this week. With coming federal carbon curbs, that trend appears irreversible across Appalachian coal country.

In a study led by the nonprofit West Virginia Center on Budget and Policy (WVCBP) and consulting firm Downstream Strategies, analysts honed the basis for a new coal strategy, as states nationwide try to move laws meant to build a different energy future.

“The WVCBP fully understands coal’s importance to West Virginia and the country. We just recognize that it’s a finite resource and the state should begin to move toward sustainable energy diversification,” Ted Boettner, executive director of WVCBP, told SolveClimate.

West Virginia provides a substantial 20 percent of all the coal mined in the United States. Last year, the industry accounted for nine percent of state employment, providing around 68,500 jobs. About 30 percent of those went to coal miners, managers and high-level staff. The rest were considered “indirect” positions.

Despite being a relatively big jobs engine for the state, though, coal mining is costing taxpayers far more than it provides, the study found.

For instance, tax revenues that flowed into state coffers from coal-related jobs last year reached around $290 million. Supporting those employees, however, cost West Virginia way more — over $400 million.

In total, after tallying up the industry’s costs and benefits, the researchers estimated that in fiscal 2009 the net cost of coal on the budget was $97.5 million.

Subsidies, Exemptions and Hidden Costs

The biggest expenses came from subsidies, tax exemptions and hidden “legacy costs” that will require hefty payouts far into the future. These include polluted drainage, drinking water contamination and health and safety threats. One of the largest “legacy” costs has been highway repairs from trucks that haul coal and destroy West Virginia’s roads in the process. The total cost required to fix the damage is $4 billion, according to the report.

“The strain on the roads from the heavier truck is 4.5 times greater than that of the lighter truck, so there is a net negative impact on the roads from allowing coal trucks to operate at 120,000 pounds,” it said.

The study explains that the cash drain — now seemingly inevitable  — wasn’t always the case. The main reason for the increasing cost burden is the declining competitiveness of West Virginia coal, as the cheapest coal reserves have been largely depleted.

According to the study, coal production likely peaked in 1997. Since then underground coal production has fallen by 25 percent. Surface mining, which is generally the less expensive way to go in West Virginia, has increased by 20 percent.

More declines are on the horizon across the board, “which will further reduce coal’s contribution to state revenues,” the report said.

“As mining declines in the future, the potential loss of state revenues will make it even more difficult to cover the annual and legacy costs of coal,” the authors wrote.

According to estimates by the Energy Information Association (EIA), a division of the Department of Energy, coal production in the entire Central Appalachian region will shrink by 46 percent, or 106 million tons by 2020.

Southern West Virginia make up nearly 50 percent of Appalachian mining. And if the state follows projected regional declines, as expected, then coal output would shrink by 53 million tons in West Virginia, or approximately 34 percent.

That’s a likely outcome, the authors argue, courtesy of coming federal restrictions on carbon emissions, tighter limits on mercury emissions, regulation of coal ash and the EPA’s Clean Air Interstate Rule, which will force power plants in the Eastern U.S. to slash soot and smog pollution. 

“This reality raises questions about West Virginia’s priorities as they relate to economic policy and energy development,” the report said.

Coal dollars in West Virginia and other mining states have historically provided vital funds to education, health and environmental protection budgets.

According to the authors, the analysis is one of few, so far, to show that the size of America’s coal economy is not as considerable as previous accounts suggest.

“The aim of this report is to broaden discussion about the coal industry’s effect on the people and economy of West Virginia. It shows that the while the coal industry does contribute significantly to state revenue and jobs, it also relies heavily on taxpayers for support,” said Boettner.

A similar report in Kentucky by the Mountain Association for Community Economic Development found that the coal industry there cost taxpayers around $115 million in 2006. 

Chamber of Commerce Fires Back

To arrive at their conclusions, the analysts in West Virginia compiled data and estimates available on tax revenues and expenditures related to the industry from July 1, 2008 through June 30, 2009.

The researchers admit there is great uncertainty in their results and do want to “provide a false impression of precision.”

“In calculating these estimates, there is an inherent degree of uncertainty associated with the results. We do not claim that our accounting of revenues and expenditures is precise,” the report said.

The $97.5 million figure, it added, “is a reasonable and plausible first approximation.”

Some of the state’s biggest coal supporters fired back at its uncertain results. The West Virginia Chamber of Commerce, a lobby representing businesses, called the report a “mockery of real academic research.”

“This report was created by people who are staunchly anti-coal, oppose job growth in the production sector, and who seek to drive away the coal and manufacturing industries, which pay the highest wages, offer the best benefits, and fuel much of West Virginia’s economy,” said Steve Roberts, chamber president, in a statement published in the Charleston Daily Mail.

In response, Boettner said Roberts is “grasping for straws” and described the WVCBP as “pro-job growth.”

“The center is not trying to end coal nor has any of our past research indicated this. We fully realize that coal is going to be mined in West Virginia and that it pays well,” he told SolveClimate. “[The chamber’s] problem is that we are taking a balanced view by looking at the benefits and costs. This is heresy is to Mr. Roberts and the chamber.”  

Their position, Boettner added, “reflects a deep anti-intellectualism that pervades often in these debates.”

“This is highly unfortunate because we all need to have an honest and open discussion on coal and not just resort to childish name calling,” he said.

See also:

Senator Byrd: Massey A Rogue Mining Company, Disgraceful

Sen. Byrd Rebukes Massey Energy Over Coal Mine Disaster, Questions Safety Practices

Coal Barons Urge Capitol Hill: No Carbon Regulation Until CCS Is in Place 

Coal Mine Where 25 Died Had Been Fined Repeatedly for Safety Violations

Sen. Byrd: Rigid Mindsets Pose Greatest Threat to Coal’s Future

Appalachia Coal Report Adds Fuel to Kennedy-Blankenship Smackdown

2 More Utilities Retiring Aging Coal Plants in Wake of Health Report