By Chris Hamilton
Coal plays a significant role both in our state and across the country, and despite the challenges we face here at home, West Virginia has the potential to be a global energy leader—if we choose to be.
Coal has long been one of West Virginia’s leading industries. For decades, it has provided thousands of good-paying jobs, infusing millions of dollars into local and state economies and providing low-cost electricity for its industries and residents. Most recently, however, a variety of factors ranging from mild weather patterns and an abundance of inexpensive shale gas to a more difficult to mine reserve base and unprecedented over-regulation has caused West Virginia to experience a loss of coal markets and a decrease in coal production.
You can be assured that the “War on Coal” is real. It has—and will continue to—hurt the industry and the thousands of families who rely on coal mining to survive. In fact, we are trying to weather one of the fiercest political assaults any American industry has ever seen, save the tobacco industry, and it is not over. The West Virginia coal industry is surviving, though, and it is part of the reason why West Virginia is thriving.
Coal Severance Boosts Budget
Never before in the state’s history has the coal industry been responsible for a greater share of the state tax revenues or prosperity throughout all facets of state and local governments.
According to a report by the business research facilities at West Virginia University and Marshall University, the coal industry provides more than $3.4 billion in wages and a total economic impact of $26 billion for the state each year.
As a result of significant and sustained increases in coal severance and other business taxes, the Mountain State has been one of only a few states to have balanced budgets—and budget surpluses—during the current recession years since 2008. West Virginia’s Rainy Day Fund has climbed to unprecedented levels because of annual budget surpluses that have been driven, in large part, by coal severance tax revenues.
Coal severance collections alone have more than doubled from 2007 to 2012 to an all-time record high of $500 million last year. Property and income taxes from coal have made similar gains during this period. Even with current losses and predictions of revised downward adjustments in collections, overall taxes from coal remain higher than ever before.
Coal and electric utilities account for more than 60 percent of all business taxes. Distribution of coal severance dollars to all 55 counties funds education and social programs—and that’s after the first $22 million goes to infrastructure projects all across the state.
Moving beyond our borders, we believe coal will continue to play an important role in our country’s energy mix for decades to come. Furthermore, we believe coal will remain viable throughout the world. It continues to be the largest source of electric power generation among all fuels—more than 90 percent in West Virginia and 40 percent in the United States. Domestic and world electric demand and steel production continues to grow, and these demands cannot be met without coal.
Today, as an industry, our role is critically important to our nation’s quest to become energy independent and break that unholy grip of our dependence on foreign oil. Coal holds the key to our country’s ability to become energy independent, secure our borders and bolster our nation’s defense system. Renewable fuel sources have a role to play, but they cannot power America 24 hours a day, seven days a week, rain or shine.
Preparing for Growth Overseas
Without question, coal use is projected to increase around the world. In fact, it is already happening.
In just one year, coal exports grew 40 percent, increasing from $5.3 billion in 2011 to $7.4 billion in 2012, and West Virginia coal accounted for 49 percent of U.S. coal exports.
Seaborne coal tonnage will grow over the next five to seven years, and we have to position ourselves to capitalize on that opportunity by cutting costs, becoming more efficient, influencing public policy and becoming more involved in the politics of the industry.
The use of coal on a worldwide basis is already on the rise. Coal is predicted to surpass oil as the world’s energy of choice by 2017, according to the International Energy Agency.
China, India, Africa and other growing regions are using more coal. Why? A big reason is that steel production is up worldwide due to economic growth, and you cannot make steel without coal. This growth is driving increases in metallurgical coal supplies in developing countries. These nations are growing and consuming steel and energy in developing their basic infrastructure.
Other nations see coal the way America used to view this resource: as an abundant, low-cost and reliable fuel. America became a manufacturing superpower thanks to coal, and it can’t be a coincidence that our global domination waned when we stopped fostering coal industry development.
West Virginia is the epicenter of the coal industry, and the opportunity is ripe for us to not only satisfy our domestic energy needs but to capitalize on rising worldwide coal demand.
Challenges Remain
Now, the reality: the coal industry is being attacked on many fronts today by government and special interest groups, and these attacks have been well documented. Although the industry has always had its share of challenges, never have they been as serious or threatening as they are today.
Our current challenges include:
• Global climate change;
• Cap and trade;
• Building a renewable portfolio;
• Carbon taxes;
• Lack of meaningful national energy policy;
• The Environmental Protection Agency’s multi-pronged regulatory assault on Appalachian coal and
• The campaign against mountaintop mining.
Last fall, we coined the phrase “Our government is coming at us by Air, Land and Sea!” because the federal government under the current administration was using every resource available to harm the coal industry. This regulatory assault settled down while the president was seeking re-election, but the administration has made it clear it is going to continue its assault on mining.
Even a cursory glance at the national energy agenda has caused power plant closings, lost coal production, increased utility rates and fuel switching. These are real threats that have a negative impact on all coal mining in our region and occupy a lot of time within other various legislative and public forums. These are political issues driven by political agendas. They require political solutions supported by brave, educated leaders who look past the rhetoric and focus on the facts.
Closer to home, we have our own challenges on top of the regulatory assault. Reports of West Virginia’s declining reserve base have been well documented. Higher production costs and greater geologic and technical challenges mean coal operators are presented with thinner seams and reserves that are more difficult to access. In simple terms, we have mined the easy stuff. But West Virginia has plenty of coal left, and our industry is working hard to bring it to market safely and efficiently.
As West Virginia’s immediate future remains challenging, other coal producing regions have a brighter outlook. The Powder River and Illinois basins are poised to prosper in the coming years and encroach further into markets currently held by West Virginia and other eastern coal producers.
Seizing the Opportunity
The United States will continue to use coal for years. That fact is borne out of basic baseload power demands. As we have seen, coal use will continue to grow around the world. The real questions today are where the coal will come from and who will benefit from the mining jobs and production revenues.
As a state, we have the potential to become an international center for energy and commerce if we can compete effectively, sustain our presence in domestic and world markets and approach it correctly—with reason, intelligence and common sense.
To retain its viability in domestic and world markets, West Virginia’s coal industry must become more efficient and competitive. The industry is committed to operating in the safest and most efficient manner possible with uncompromising detail to environmental quality. The coal industry is full of environmentalists, and we take that responsibility seriously.
So, is our glass half-empty or half-full? With widespread slowdowns, layoffs, mine closures, lost production and growing reports of our purported demise, some would say our glass appears to be half-empty.
But I ask you to look at our industry with fresh eyes. We have the best, highest-grade metallurgical coal, and world demand is rapidly increasing. As natural gas prices inevitably trend upward, coal will regain market share. As you can see, our glass is half-full.
Yes, the coal industry has its challenges at home and abroad, but West Virginia coal can provide for our families, protect America and power the world. The opportunity is before us. We must work together and make West Virginia the global energy leader we know it can be.
