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

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

By Stacy Feldman

Jun 25, 2010

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.

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