Coal has been “king” for most of the last century in West Virginia and central Appalachia, but in recent years, global market forces, governmental regulations and alternative energy sources like natural gas have reduced its dominance.
That drop off has caused job losses as well as losses in income and severance taxes. At the same time as those coal companies close down, and often declare bankruptcy, it has left abandoned mines behind.
Brian Lego is a research assistant professor at West Virginia University’s Bureau of Business and Economic Research. He was one of the authors of a 2018 study called “The Economic Impact of Coal In West Virginia.” He said that coal production peaked most recently in 2008, when oil prices were high. Natural disasters and the Fukushima nuclear meltdown in 2011 also prompted strong global demand.
But coal production has only fallen since then. In an email he noted that “coal production averaged a shade under 80 million short tons (annualized rate) in the first quarter of 2021 and appears to have increased to somewhere in the low- to mid-80 million short tons range during the second quarter.”
That is down from 150 million short tons in 2010.
Lego expects the short-term outlook for coal exports from West Virginia to remain stable through 2023 and 2024 — exceeding coal exports for 2019 and 2020. But, he wrote, exports would likely fall short of the 2017/2018 period – barring some stronger-than-expected growth in metallurgical coal demand.
In more general terms, he said he expected exports to decline over the next decade and then fall off more sharply in the 2030s.
From his perspective, natural gas is a major factor.
“Particularly here in the Mid-Atlantic region,” Lego said in an interview. “With the Marcellus and Utica shale, that was a major emergence of a competitor to coal-fired power in the entire U.S. The amount of growth in electricity generation that’s come from natural gas has, essentially, tripled. Natural gas accounts for half of the region’s electricity generation.”
Jobs
Since 2010, West Virginia has seen a net loss of more than 6,000 direct coal mining jobs since 2010, according to WorkForce West Virginia. There are 14,780 men and women currently working in mining in West Virginia, down from 43,875 in 1971.
The Appalachian region as a whole lost 27 percent of its coal jobs between 2005 and 2015, according to a report released by the Appalachian Regional Commission. The U.S. Energy Information Administration indicated there were about 30,000 people employed in coal mining throughout Appalachia in 2019.
Budgets
The fall in coal production has brought more than just layoffs. Coal severance taxes, which pay for things like schools and senior services, have also taken a hit. In 2010, these taxes brought in more than $300 million or about eight percent of the state’s general revenue fund.
In 2020, according to numbers supplied by the state Department of Commerce, total coal severance taxes were just over $200 million. That’s about four percent of the state’s General Revenue Fund.
Employment taxes from those directly associated with coal mining amounted to just over $125 million in 2010, according to a report from the Center for Budget and Policy. At the time there were 21,012 West Virginians directly employed in coal mining. The report estimated that each coal mining employee paid just under $6,000 per person in income taxes to the state.
Using the CBP estimate of approximately $6,000 in income taxes per miner, that reflects a drop of payroll tax income for the state of nearly $37 million to just less than $88 million.
Legacy costs
Coal mining also has a number of legacy costs– from abandoned mine lands to road damages from coal trucks.
A report from the Ohio River Institute says that Abandoned Mine Lands (AML) in West Virginia — these are coal mines abandoned before 1977 — account for just over 20 percent of the U.S. total and more than 24 percent of the costs.
Those mine lands account for 173,000 acres of land that need reclaimed with reclamation costs estimated at $5 billion. Only Pennsylvania has more unreclaimed pre-1977 mine lands than West Virginia. More than 30 percent of West Virginians live within a mile of an unreclaimed mine site.
Since the AML law passed in 1977, federal law has required mine owners to establish bonds that would pay for clean-up costs for coal mines. The law gave states considerable leeway in how they set up those bonds, however, and most are severely underfunded.
A report by Appalachian Voices, called Repairing the Damage, looked at the costs associated with more modern coal mines that have been abandoned as coal companies have declared bankruptcy. Much of the necessary clean-up costs are not covered by existing bonds.
Between 2008 and 2017, the number of coal mines plummeted from 1,435 to 671 mines in 2017, according to the Energy Information Administration.
In a seven-state area, there were 633,000 acres of land that needed some level of cleanup. More than 200,000 acres of that was in West Virginia — the highest total for a single state. Kentucky was slightly lower.
The total estimated outstanding cost of this reclamation ranges from $7.5 to $9.8 billion. The total available bonds amount to approximately $3.8 billion.
The clean-up process is expensive, says Erin Savage, who wrote the Appalachian Voices report and calculated clean-up costs for various mine types.
“A fully unreclaimed surface mine, I have at about $12,000 per acre to reclaim. Underground mines at about $29,000 per acre. And the other mines are the processing facilities and those are at $26,000 per acre,” she said.
West Virginia has approximately $3 billion of reclamation liability, from mines abandoned after 1977, but only has approximately $1.2 billion in bonds to secure that reclamation.
A recent legislative audit of the state’s reclamation fund found that the bonds the coal companies are supposed to obtain to reclaim land once mining is done are set between $1,000 and $5,000 per acre. That’s simply not enough, according to Savage.
“For West Virginia, I estimated that the bonds cover roughly 31 to 49 percent of the potential liability,” she said.
Savage noted that this problem may be too big for the state government to deal with on its own.
“The water pollution, the erosion, flooding, those aren’t just environmental issues, those have direct impacts on the communities that live around those mines,” she said. “And that’s why we really think the federal government needs to step in here.”
But she also wants to see the private companies that created the messes held accountable.
“We wouldn’t want to see some new program that really lets coal companies off the hook and incentivizes bankruptcy and just walking away,” she said.
Restructuring bankruptcy in most cases allows companies to shed prior environmental and other obligations. From 2010 to 2019, more than 50 U.S. coal companies declared bankruptcy.
The $1 trillion infrastructure bill passed by the U.S. Senate and pending before the U.S. House of Representatives includes additional money for the AML program.
Reclamation
One conclusion made in the Appalachian Voices report was that if the “remaining 633,000 acres in need of reclamation were reclaimed, this would create between 23,000 and 45,000 job-years across the Eastern states. Proper mine reclamation could have significant positive economic impacts, and contribute to carbon sequestration and climate change resilience.”
An example of how reclamation can change things is in the town of Smithers in Fayette County, West Virginia. An underground mine in the hill above the town was full of water and literally buckling U.S. Route 60 — a road that sees 7,000 cars a day during the non-tourist months.
Smithers Mayor Anne Cavalier said they called it the “mountain on the move.”
“That was created because abandoned mine lands from probably 50, 70 years ago had been mined out and they had filled with spring water,” she said. “Mountains are just full of springs and the water pressure was simply pushing that mountain out.”
She said that if Route 60 had been forced to close, even for a few years, none of the businesses in the town would have survived.
But now the town has a completely different future. A reclamation project through the state Department of Environmental Protection stabilized the hillside with pilings and relieved the water pressure, preserving the road. Traffic continues to move past the town with travelers stopping for gas and food.
Just two miles from Smithers, another reclaimed coal mine has been turned into the Mammoth Preserve by the West Virginia Land Trust. Cavalier noted it is 5,500 acres of land for camping, mountain biking and horseback riding.
“I see us sitting here now in a sweet spot. I see new jobs and new futures for the members of those families who can make that transition from coal to tourism,” she said.
The ability for the town of Smithers to go from facing an uncertain future to one where the future looks bright is thanks to the reclamation of former mine sites. And Cavalier looks forward to what she hopes will be a time of renewal for her home.
“I’ve never been more excited about this town’s history,” she said.