Appalachia Today: Part 13 – Government Proposals for Change

Whatever regulatory relief the Trump administration may provide, coal is very likely to continue to fail to compete effectively with its No.1 rival, cheaper and cleaner natural gas, a problem the Trump administration is unlikely to solve. Indeed, natural gas is likely to become an even more potent competitor under the Trump administration given the Trump proposal to deregulate gas exploration and pipeline development.[i] In his energy plan, Trump promised to achieve energy independence by becoming a net energy exporter.[ii] And this achievement, according to Energy Information Administration, is already around the corner.[iii]

Ted O’Brien, a coal analyst at Doyle Trading Consultants, questioned whether there would be any beneficial impact on coal employment due to Trump’s proposed elimination of regulatory requirements since future coal demand seems unpromising.[iv] Domestically speaking, coal is mainly used to generate electricity. In the Annual Energy Outlook 2017 published by the Energy Information Administration, coal production would increase through 2020 to more than 800 million short tons.[v] In the long term, however, unfavorable economic conditions compared with natural gas and renewables EIA predicts that coal production will decline – coal production in reference case was expected to decline to 620 million short tons per year by 2040.[vi]

President Donald J. Trump

Photo: President Trump signing off Executive Orders. President Trump, signed an executive order on March 28 to nullify President Obama’s climate change efforts and to revive the coal industry as he promised during his campaign. (Source: White House)

 On the export side, the US has been the major exporter for metallurgical coal and it will continue to be a net exporter of coal and coke, but its exports growth is not expected to increase significantly because of competition from other global suppliers closer to major markets.[vii]

In addition to the sluggish coal demand, there is a second major factor behind the drastic decline in coal mining employment.[viii] Jobs in mining have fallen victim to automation, and most of the losses have come in Appalachian mines.[ix] Back in the pick-and-shovel era, there could be more than 100 people working at the face of an underground mine, digging for coal and bringing it to the surface. Today, thanks to mechanization, there might be seven people doing the same work. And using the technique known as mountaintop removal, the same amount of coal can be extracted by just two people using huge machines. [x]

President Obama’s Clean Power Plan was blamed in the election as the killer of mining jobs, and Trump’s promise to eliminate it raised miners’ hope for reviving employment in the coal industry, especially in Appalachia. Bill Raney, the president of the West Virginia Coal Association, was thrilled about Trump’s energy plan. “Just a positive attitude in the White House is enormously important,” he said, and “some plants can get back on line” after Trump dismantles Obama’s Clean Power Plan.[xi] In consideration of this scenario, the EIA projected that the demand for coal industry will have a much better future compared to the reference case  – with no Clean Power Plan the coal production will reach 850 million short tons  per year in 2040.[xii] Unfortunately, while the interior region market share is predicted to grow from 20% of US coal production in 2016 to 26% by 2040, the Appalachia and Western production will lose market share in both the reference and No CPP cases.[xiii] The reason is straightforward – a ton of coal costs about $68 to mine in eastern Kentucky and about $12 to mine in Wyoming today.[xiv]

President Trump’s Thank You Rally

Photo: President Trump in Louisville Kentucky in March 2017. (Source: The Office of President of the United States)

Trump promised the coal communities repeatedly during his campaign that he would bring the coal industry back to life. According to Trump’s 100-day action plan to Make America Great Again, he will lift restrictions on the production of $50 trillion worth of job-producing American energy reserves[xv], including eliminating the moratorium on federal coal land leasing.[xvi] Trump also promised to streamline permitting rules and to conduct a top-down review of all anti-coal regulations issued by the Obama Administration.[xvii] For another effort at deregulation, Trump promised to shift EPA’s mission to ensure clean air, and clean, safe drinking water for all Americans.[xviii] Trump represented in his 100-day plan that he would focus on “clean coal” as a potential job creator, a strategy which will heavily rely on the development of effective and cost efficient carbon capture and storage technology.

U.S. Coal Mining Employment

Photo: Average annual number of coal miners, 1985 to 2015 (Data from St. Louis Federal Reserve Board). (Source: Plazak)

In fact, the coal market has shown some improvement in the first few months of 2017. Natural gas prices are higher than they were a year ago and China is cutting back on its coal production, factors which have made coal more competitive and raised metallurgical coal prices. A few Appalachian mines have even reopened due to the increase in met coal prices. And in the U.S. as a whole, coal output has increased 15% from 2016. Despite this, Trump’s promise to bring coal jobs back to Appalachia is still unattainable because of the widespread mechanization of coal mining. The country’s most automated, efficient mines are found in the Powder River Basin in Wyoming and Montana. Since the cost of mining coal is much less in the western United States, it is there that production would increase, not in Appalachia, where the coal extraction process is less mechanized and less efficient. As Robert Godby, a professor of energy economics at the University of Wyoming, said, “We could see an increase of coal production and still see a decrease in coal jobs.”[xix] In short, the way of life associated with coal mining in Appalachia is gone.

Automation and Employment

Photo: Mechanization and automation taking over jobs and worsening unemployment (Source: Qniksefat)

What will the post-coal life be like in Appalachia? Economically speaking, in fiscal year 2016, among the 420 counties in the Appalachian region 93 are distressed, 110 at risk, 205 are in “transitional” status. Take Beattyville, KY as an example, where the median household income is just $12,361 compared to the national median household income of $53,915 (2012). Even more shockingly, the retirement income in Beattyville is $6,500 compared to the national average of $21,500.[xx] What is Beattyville to do?

In shaping a new Appalachian economy, therefore, most experts insist that the region must move away from coal, both out of necessity and the need to build a sustainable economy. While many in the region have blamed federal emissions restrictions for coal’s decline, these restrictions are just “a handy scapegoat for the writing already on the wall,” according to Rev. Zachary Drennen, the executive director of Strong Mountain Communities, a local nonprofit. Removing these restrictions would not revive the industry because demand for coal is still low, and many of the coal-fired plants that closed recently were scheduled to be shut down anyway because they have become obsolete. Even if the coal industry in Appalachia were to somehow regain all the jobs it lost recently, the region would still not recover. What is needed is a “new economy,” according to Peter Hille, president of the Mountain Association for Community Economic Development.[xxi]

Experts say that the answer is to focus on building a diversified economy. However, this comes with its own challenges. For example, entrepreneurship would have to be a major component of a diversified economy, but entrepreneurs in Appalachia currently have limited access to capital. There are no venture capital firms in West Virginia, and Forbes has declared the state the worst one in the country for doing business.[xxii] Furthermore, some have suggested that even the culture of Appalachia may make change difficult. In the early 2000s, for example, Toyota had proposed building a plant in a West Virginia county, but this met opposition from residents, many of whom were World War II veterans. When the plant did open eight years later, there were celebrations and even a parade with American and Japanese flags, since the new plant created 1,100 new jobs for residents.[xxiii]

President Obama in Beckley, WV

Photo: President Barack Obama walks with Linda Davis, the grandmother of deceased miner Cory Davis, during a memorial for the victims of the Upper Big Branch Mine explosion in Beckley, W.Va., April 25, 2010. (Source: Pete Souza)

The Obama administration proposed in 2015 to use $1 billion from the Abandoned Mine Lands Fund over the following five years to help Appalachian coal communities transition from the dying coal industry.[xxiv] In 2016, Obama’s federal budget included a $10 billion Power Plus Plan” to create new jobs, ensure the health and retirement of coal families, support economic diversification, and deploy carbon capture and sequestration technologies.[xxv] And, as part of FY 2016’s budget, the Power+ initiative promised to invest roughly $10 billion into a set of coal country goals including economic diversification, environmental clean-up, health, and retirement security for workers.[xxvi]

Similarly, Clinton’s campaign proposed a different direction for the coal communities than Trump: a $30 billion package of proposals to insulate coalfield workers and their families from economic upheaval amid a transition to cleaner sources of energy.[xxvii] Clinton proposed to launch federal programs to ensure healthcare and pension benefits,  local school funding, and  job training and career developing.[xxviii] She also suggested a public private partnership to diversify local economy and reuse the industrial heritage.[xxix]

But the Clinton proposal failed to convince the coal-dependent communities.[xxx] “It’s made-for-campaign rhetoric,” National Mining Association spokesman Luke Popovich said.[xxxi] He blamed the administration for eviscerating a high-wage industry and offering welfare money instead.[xxxii] Before the price of coal collapsed, miners without a high school education could make $60,000 to $75,000 a year. Walmart money doesn’t come close.[xxxiii]

Hillary Clinton During 2016 Presidential Campaign

Photo: Clinton failed to convince the Appalachian coal communities with her policies proposals in the 2016 Presidential campaign. (Source: Lorie Shaull)

Similarly, the Clinton job training plan has also been criticized. Abby Foster, a spokeswoman for the Pennsylvania Coal Alliance indicated that other jobs that miners can get in the communities typically pay far less.[xxxiv] The most distressed Appalachians live through federal entitlement programs (food stamps, disability, black lung payments, etc.). Ed Courier, a local mining company owner, argued that federal entitlements had dragged Beattyville down. “It’s made things worse. It’s disincentivised people from even trying. You can’t create a handout and expect people to pull themselves up. You have to give them the incentive to improve.” he said.[xxxv] And John Stilley, the president of Amerikohl Mining, testified at a state government hearing that “we do not want federal money to fund training for new jobs that pay half of our current salaries. We want fair regulations so investors will continue to fund research and development.”[xxxvi]

The Appalachian Regional Commission (ARC) has promised to continue to provide support to the most distressed counties and will provide $70 million annually to implement new programs which aims to create and/or strengthen 12,500 businesses, create and/or retain 100,000 jobs, and improve 110,000 local residents by strengthening entrepreneurial ecosystem, supporting existing businesses, encouraging promising startups (diversified energy, tourism, food, and health care),  and promoting export strategies to connect local businesses with external and global markets. ARC coordinates with federal and state agencies, universities, and manufacturers to develop innovative projects. [xxxvii]

For instance, ARC’s Shaping Our Appalachian Region (SOAR) initiative of ARC in eastern Kentucky aims to promote innovation to help transform local business and attract external programs. Out-of-work Kentuckians are also turning to farming because in 2014, Congress allowed certain states, including Kentucky, to begin farming industrial hemp after a ban of 60 years. And today, with grants from companies like Patagonia, the clothing manufacturer, former miners were able to expand their farming business.

Unemployment is Haunting Appalachian Economy

Photo: Decline in coal jobs and lack of alternatives has further devastated Appalachia and new economic plans failed to bring sufficient jobs. (Source: John Allen)

Despite the efforts to promote innovation and startup businesses, the projects are small-scale affairs. In rural regions it is difficult to transition from public assistance into the labor market because of a lack of employment opportunities and social/human capital to facilitate a transition.[xxxviii] Nearly 13,000 coal jobs and countless more in related industries have disappeared in Kentucky since 2008. Despite the efforts made by new businesses to provide more employment, the effort is failing to come close to meet the excess labor supply. For example, BitSource, an internet startup, was only able to hire 10 former mine workers among 1,000 laid-off miners who applied for the jobs.[xxxix] The ARC’s hope to boost local economy by developing tourism also has a major challenge – the jobs are seasonal.[xl] “It’s bad. I don’t think rural America has a future,” said Courier. “The advantage rural areas had in the past of cheap labor is gone. We used to have a lot of little factories in this area but they’ve gone to Mexico or China. In rural areas housing is cheap but everything else costs more. Utility rates are higher. Food and transport are higher. Management doesn’t want to live in rural areas. Education is horrible here. This is a third-world county.”[xli]

[i] https://www.nytimes.com/2016/11/20/business/energy-environment/a-bleak-outlook-for-trumps-promises-to-coal-miners.html

[ii] https://www.donaldjtrump.com/press-releases/an-america-first-energy-plan

[iii] https://www.washingtonpost.com/news/energy-environment/wp/2017/01/06/trump-wants-energy-independence-we-may-already-be-on-the-verge-of-having-it/?utm_term=.01ef845a112e

[iv] https://www.nytimes.com/2016/11/20/business/energy-environment/a-bleak-outlook-for-trumps-promises-to-coal-miners.html

[v] http://www.eia.gov/outlooks/aeo/pdf/0383(2017).pdf

http://www.eia.gov/outlooks/aeo/pdf/0383(2017).pdf

[vii] http://www.eia.gov/outlooks/aeo/pdf/0383(2017).pdf

[viii] https://www.nytimes.com/2016/11/20/business/energy-environment/a-bleak-outlook-for-trumps-promises-to-coal-miners.html

[ix] https://www.nytimes.com/2016/11/20/business/energy-environment/a-bleak-outlook-for-trumps-promises-to-coal-miners.html

[x] http://www.governing.com/topics/finance/gov-coal-trump-appalachia-economy.html

[xi] https://www.nytimes.com/2016/11/28/us/donald-trump-coal-country.html?_r=0

[xii] http://www.eia.gov/outlooks/aeo/pdf/0383(2017).pdf

[xiii] http://www.eia.gov/outlooks/aeo/pdf/0383(2017).pdf

[xiv] https://www.theguardian.com/us-news/2015/nov/12/beattyville-kentucky-and-americas-poorest-towns

[xv] Trump, Donald. “Donald Trump’s Contract With The American Voter.” https://assets.donaldjtrump.com/_landings/contract/O-TRU-102316-Contractv02.pdf

[xvi] “Energy.” https://www.donaldjtrump.com/policies/energy/

[xvii] Trump, Donald J. “Trump Outlines Plan for American Energy Renaissance”, September 22, 2016, https://www.donaldjtrump.com/press-releases/trump-outlines-plan-for-american-energy-renaissance

[xviii] Trump, Donald J. “Trump Outlines Plan for American Energy Renaissance”, September 22, 2016, https://www.donaldjtrump.com/press-releases/trump-outlines-plan-for-american-energy-renaissance

[xix] Tim Loh, “Trump may help revive U.S. coal output, jobs are another story,” Bloomberg, March 10, 2017. https://www.bloomberg.com/news/articles/2017-03-10/trump-may-help-revive-u-s-coal-output-jobs-are-another-story.

[xx] https://www.theguardian.com/us-news/2015/nov/12/beattyville-kentucky-and-americas-poorest-towns

[xxi] Marlene Cimons, “The growing urgency of building a new economy in coal-powered Appalachia,” ThinkProgress, December 21, 2016. https://thinkprogress.org/revitalizing-a-coal-powered-culture-fc5149c3bc04#.kxl34fvld.

[xxii] Courtney Balestier, “Coal is dying – Coal country doesn’t have to: Creating the post-coal economy in Appalachia,” Fast Company, December 12, 2016. https://www.fastcoexist.com/3065766/coal-is-dying-coal-country-doesnt-have-to-creating-the-post-coal-economy-in-appalachia.

[xxiii] Marlene Cimons, “The growing urgency of building a new economy in coal-powered Appalachia,” ThinkProgress, December 21, 2016. https://thinkprogress.org/revitalizing-a-coal-powered-culture-fc5149c3bc04#.kxl34fvld.

[xxiv] http://www.dailyindependent.com/news/obama-seeks-aid-for-hard-hit-coal-country/article_4909a72c-ab2a-11e4-a6a8-a3a81f385a5a.html

[xxv] http://www.powerplusplan.org/whatispowerplus/

[xxvi] http://www.insidephilanthropy.com/workforce-development-grants/2016/4/22/whos-funding-appalachias-transition-from-coal.html

[xxvii] Goode, Darren. “Clinton Proposes $30 Billion Aid Plan For Coal Communities.” Politico. November 12, 2015

[xxviii] https://www.hillaryclinton.com/briefing/factsheets/2015/11/12/clinton-plan-to-revitalize-coal-communities/

[xxix] https://www.hillaryclinton.com/briefing/factsheets/2015/11/12/clinton-plan-to-revitalize-coal-communities/

[xxx] http://www.politico.com/story/2015/11/hillary-clinton-aid-coal-communities-215789

[xxxi] http://www.politico.com/story/2015/11/hillary-clinton-aid-coal-communities-215789

[xxxii] http://www.politico.com/story/2015/11/hillary-clinton-aid-coal-communities-215789

[xxxiii] https://www.washingtonpost.com/politics/in-west-virginia-coal-country-voters-are-thrilled-about-donald-trump/2016/12/06/8eb0b0ca-b8c2-11e6-b994-f45a208f7a73_story.html?utm_term=.3b906bc11623

[xxxiv] http://www.politico.com/story/2015/11/hillary-clinton-aid-coal-communities-215789

[xxxv] https://www.theguardian.com/us-news/2015/nov/12/beattyville-kentucky-and-americas-poorest-towns

[xxxvi] http://www.politico.com/story/2015/11/hillary-clinton-aid-coal-communities-215789

[xxxvii] https://www.arc.gov/images/newsroom/publications/sp/InvestinginAppalachiasFutureARCs2016-2020StrategicPlan.pdf

[xxxviii] http://scholarworks.wmich.edu/cgi/viewcontent.cgi?article=3361&context=jssw

[xxxix] https://www.nytimes.com/2016/08/18/us/beyond-coal-imagining-appalachias-future.html

[xl] http://www.governing.com/topics/finance/gov-coal-trump-appalachia-economy.html

[xli] https://www.theguardian.com/us-news/2015/nov/12/beattyville-kentucky-and-americas-poorest-towns