Is coal really worth it in West Virginia?
By Mannix PorterfieldRegister-Herald Reporter (Beckley, WV), June 22, 2010
BECKLEY — A lengthy report performed on the industry’s impact by two West Virginia groups leads to a penetrating question: Is King Coal the valuable monarch he projects, or an expensive court jester, draining away taxpayer dollars?
Covering more than 80 pages, the study was conducted by Rory McIlmoil and Evan Hansen of Downstream Strategies, based in Morgantown, and Ted Boettner and Paul Miller of the West Virginia Center on Budget and Policy in Charleston.
Before getting too deep inside the report, the two organizations answered the question, concluding that the coal industry "actually costs West Virginia taxpayers more than it provides."
As of two years ago, coal was produced in 27 counties with a combined output of 164 million tons and a payroll of 22,493 miners, managers and upper-level staff.
More than half of the production comes from five counties — Boone, Logan, Mingo, Kanawha and Monongalia.
"Coal's importance for West Virginia is not likely to grow in the future, based on the declining competitiveness of West Virginia coal, resulting from the depletion of the lowest cost coal reserves," the report said.
Hastening the decline of the industry in the Mountain State likely will be implementation of a federal clean air rule, climate legislation, more rigid limits on mercury emissions, regulations on combustion wastes and pending restrictions on valley fills in strip mining, the report said.
If all those forces come to bear, the report said, coal's provisions to state and local budgets will "likely diminish," the researchers said.
"It should be no surprise — coal is not king in the West Virginia economy, even though our decision makers act as if it is." said Jim Sconyers, chair of the West Virginia Sierra Club.
"It is a total outrage that the long-suffering West Virginia taxpayer is forced to pay millions of dollars so the filthy rich coal companies can destroy our roads, mountains, and communities."
McIlmoil, the lead author of the report, said the industry does provide substantial benefits to the state but simultaneously imposes massive costs that were evident in the fiscal 2009 budget.
"These are costs that, lacking a change in state policy, will be paid by the citizens of West Virginia for decades to come," he added.
Given all the plusses and minuses, the report said the net cost to the state in fiscal 2009 came to $97.5 million.
That year, the industry provided the state with $307.3 million in revenues from severance corporate net, business franchise and other taxes. All told, the industry accounted for about 8 percent of the money in state-generated revenues.
Considering the $113.7 million spent by state government on repair of haul roads and the operations of the Department of Environmental Protection, however, the tax yields were lessened. Given those expenses, the net benefit to the state would be $193.6 million. Another consideration must be the tax exemptions, credits or reduced or preferential tax rates. This cost the state $173.8 million in fiscal 2009, the researchers said.
Taxes related to direct employment totaled $125.5 million, but it cost $125.9 million in state expenditures to support them, the report said.
Indirect employment generated some $167.9 million in state revenues, but taxpayers were hit with a $284.8 million bill to support them, leaving a net cost of some $116.9 million.
The researchers also pointed to "legacy costs," such as the projected $1.5 billion needed to clean up 4,391 abandoned mines. Then there is the matter of damage done to roads and bridges by heavy coal trucks, pegged at $4 billion.
"Even if the state were spending $200 million per year to repair and replace the infrastructure as needed, it would take 20 years of repairs and a cessation of coal truck operations to cover the full cost," the joint effort said.
Yet a third legacy entails the workers compensation debt that piled up before privatization and known as the "Old Fund," which embraces some costs attributed to mining deaths and injuries — an estimated $115.5 million.
"This represents a substantial source of lost revenues that the state could be putting to more beneficial uses," the report said.
"While every job and every dollar of revenue generated by the coal industry provides an economic benefit for the state of West Virginia and the counties where the coal is produced, the net impact of the West Virginia coal industry, when taking all revenues and expenditures into account, amounted to a net cost to the state of $97.5 million in fiscal year 2009."
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