The Economics of Coal by Chris Hamilton

Total Economic Impact of Coal on West Virginia’s Economy

Coal is currently mined in 30 counties in West Virginia. According to data from the West Virginia Office of Miners’ Health, Safety and Training, coal mining in West Virginia has provided an average of 23,000 direct mining jobs plus another 60,000 support jobs (verified data via West Virginia University and Marshall University Colleges of Business). These jobs pay on average $70,000 a year, which is twice the average per capita wage in the state. Many miners who make as much as $100,000 a year. The industry provides $26 BILLION a year to state’s economy and pays approximately $3.6 BILLION a year in wages to the state’s miners. And many of these jobs are in some of the most rural, most impoverished areas of the region — where other well-paying jobs are almost impossible to find. (Note:This is not because of mining but rather is due to the extreme isolation, lack of quality highways, lack of readily developable land and a host of other geographic factors).So rather than contribute to poverty, as some on the left would have you believe, mining actually alleviates to some degree the poverty that exists in the region.

West Virginia has more than 200 years of coal left in the ground. Yes, some of the easiest-to-mine seams have been largely depleted but there remains a huge amount of identified economically mineable coal reserves and much more still that has not been “proven” but known to exist (much like the deep gas reserves of the Marcellus shale).

There has been a decline in Central Appalachian coal production. This decline is partly the result of the worldwide economic recession we have suffered since late-2007. It is also partly attributable to more difficult geologic conditions. But the primary cause of this decline in coal production – particularly over the past two years when the international markets for coal have rebounded – is the Obama Administration’s ongoing war against Eastern coal production.

Since the Obama Administration took office in January 2009, it has been virtually impossible to get a mining permit of any kind approved by the U.S. EPA. Further, even permits that have already been approved have been cast into doubt by the action of the EPA in revoking a previously granted four-year old permit for the Spruce surface mine in Logan County, effectively saying to any business that depends on obtaining permits from the federal government that their promises are not worth the paper on which they are printed. How can this not have a chilling affect on investment and business activity?

Five years ago — before the recession hit in its full impact — West Virginia produced more than 160 million tons of coal. Since Obama and the EPA began their assault on coal, West Virginia’s production has fallen to 129 million tons. All the while, demand for West Virginia coal has increased.  Our coal is known around the world for its high-BTU, low sulfur content. It is sought after for both steam and steel making. In fact, West Virginia coal is, on average, 100 percent more efficient than western coal reserves. It takes 2 tons of western coal to equal the heat capacity of 1 ton of West Virginia coal.

To argue that demand is driving the production decline is an outright fabrication. In fact, the price of West Virginia coal is now at historic levels. The demand is there. The problem is very simply that the Obama Administration and the EPA are doing everything possible to choke off production in Appalachia.

What does 1 million tons of coal mean?

Basic calculation:  144 million tons produced divided by 27,892 coal jobs as noted in the 2010 Coal Facts equals a per capita annual coal production of 5,163 tons. We can then use .69 (100/144) to get our basic calculation of 19,245 jobs per 100 million tons produced. From there we can extrapolate the following data for 1 million tons of production.

Note:  Jobs and other economic impact data are based on this multiplier applied to the data from the Joint MU/WVU Economic Impact Assessment Study of 2010, which used 2008 data as its baseline.

Employment:

  •             Direct                                                    192      direct mining jobs
  •             Indirect                                                 250      support jobs
  •             Induced                                                170       induced jobs
  •             Total:                                                     612      total jobs

Payroll:  (note:  estimates based on MU/WVU study data)

  •             Direct                                                                    $13.2 million annually
  •             Indirect/Induced                                                  $22.7 million annually
  •             Total                                                                      $35.9 million annually
  •             Total Economic Impact                                         $260 million annually
  •             Production Value:                                                 $86.1 million
  •             Severance Taxes:                                                  $3.8 million (annual coal severance
  •                    County Distribution                                       $284,418 (annual 75% distribution total)
  •              General Taxes:                                                     $4.9 million

AML Fund:      Calculated Using 60 percent/40 percent underground versus surface production as baseline as indicated by production data reported in 2010 Coal Facts    

  •             Underground  (13.5 cents per ton)                          $81,000
  •             Surface  (31.5 cents per ton)                                    $140,000

Federal Black Lung: (Black Lung Assessment)

  •             Underground  (1.10 cents per ton)                             $ 6,600
  •             Surface  (.55 cents per ton)                                         $ 22,000

Federal /State: (Black Lung Workers Comp.) “Brickstreet”

Note:  Calculation is based on just 14,197 underground and 6,255 surface employees at the $68,500 annualized average wage respectively. That total is divided by 100 to account for the wages and then that is multiplied by the assessment fee to arrive at the dollar figure shown.

  •             Underground  (1.31% per $100 wages)           $ 127,396
  •             Surface  ( 3.16% per $100 wages)                    $ 135,396
  •             State (.86% per $100 wages)                             $ 120,482

Special Assessment:

  •             Underground  (.144 cents per ton)                    $86,400
  •             Surface  ( .02 per ton)                                         $8,000

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