This article originally provided by The Charleston Gazette

July 21, 2011

Report urges long-term view on coal, gas industries

By Paul J. Nyden

CHARLESTON, W.Va. -- Coal mining and natural gas drilling offer industry employees a major economic boost -- as long as those resources last, according to a study released on Thursday by the West Virginia Center on Budget & Policy.

However, residents in coal-producing counties in West Virginia typically face more health, education and economic problems than residents in other counties, even when coal mining is still a vibrant industry.

When energy reserves are gone, counties typically face bigger economic and social problems.

"Booms and Busts: The Impact of West Virginia's Energy Economy" urges West Virginia political leaders to levy new severance taxes on energy producers to help future generations -- as policymakers have in several states, including Alaska, New Mexico and Wyoming.

Problems are likely to intensify in the future, the authors of the report argue, because most mining counties in West Virginia and other states "lack economic diversity, lack an educated workforce and have large income inequality."

"A trust fund will ensure that the economic benefits of today's coal and gas production are with us well into the future. Income from the fund can help us build long-term economic growth," said Ted Boettner, co-author of the study and executive director of the Center on Budget & Policy.

Sean O'Leary, co-author of the study, said, "Our research shows that the counties with heavy concentrations of coal mining and gas drilling employment underperform economically in the long-run."

Annual coal production peaked in West Virginia in 1997 and 1998, at 181.9 million and 180.8 million tons, respectively.

But coal production already dropped to 165.8 millions tons by 2008 and to 144 million tons in 2009, according to the state Office of Miners' Health, Safety and Training. Thursday's report predicts annual coal production in West Virginia will drop to about 100 million tons in 2015.

But coal remains a major economic force.

Last year, the coal industry paid $1.6 billion in wages. In 2008, the coal industry paid $684 million, or about 10 percent, of all state and local tax revenues in West Virginia.

West Virginia is still an energy state. About 11 percent of its annual gross state product, or $7.2 billion, comes from extractive industries -- primarily coal and natural gas.

"Unfortunately, the ability of these counties to diversify their economies is hampered by their remoteness and lack of infrastructure, such as major highways and broadband," the study states.

Diversification is key to future prosperity, the report argues: "A diversified economy is more resilient and less sensitive to the ups and downs associated with any particular industry, because risk is spread more evenly across more sectors."

Today, Marcellus Shale development promises a new boom in natural gas drilling, which could lead to thousands of new jobs.

But, the report warns, "communities in West Virginia that historically have relied heavily on natural resource extractive industries have underperformed in the long term."

During the energy boom of the 1970s, West Virginia's mining counties enjoyed faster rates of growth -- in corporate earnings, personal income, employment and population -- than the state as a whole.

But economic prosperity declined in those counties during the 1980s and 1990s. With today's "renewed surge in energy development," the report states, mining counties are now growing at the same rate as other counties, but not as well as during the 1970s.

Today, most coal mining counties have median household income levels below state averages while family poverty rates remain above. In 2009, only two of 14 mining counties had median household incomes above the state average -- Boone and Nicholas counties.

Overall, coal counties had a median income of $30,655, almost 18 percent below the state median of $37,356.

Reach Paul J. Nyden at pjny...@wvgazette.com or 304-348-5164.