A Tale of Two Reports: Researchers Differ on Coal’s Economic
Impacts
New reports examine the pros and cons of coal in West Virginia.
The State Journal
14 September 2010
By Walt Williams
It is the best of energy resources, it is the worst of energy
resources.
Two teams of researchers funded by competing special interests have
reached very different conclusions about the impact of coal mining on
the state’s fiscal health. And both claim there are gaps in the other
team’s data.
The first report by West Virginia University and Marshall University
economists found the coal industry generated more than $676 million in
state taxes as well as provided more than 20,000 jobs in 2008 alone. It
was funded in part by the West Virginia Coal Association.
The second study by the West Virginia Center on Budget and Policy and
Downstream Strategies of Morgantown found the industry resulted in an
economic loss of $97.5 million when one looked at the state’s general
fund and road fund budgets alone.
The authors also pointed to potentially billions of dollars in industry
“legacy costs” that taxpayers may get stuck with. The study was partly
funded by the Sierra Club and Natural Resources Defense Council.
Both reports are simply the latest in a long string of studies
exploring the costs and benefits of coal. And it seems each of the
studies comes to differing conclusions about coal’s economic impact.
Either study could be used to shape state policy about the industry,
although as Delegate Nancy Peoples Guthrie, D-Kanawha, noted at a
legislative hearing Sept. 13, that situation was less than ideal.
“Each one of these only provides us a snapshot of coal,” she said.
The authors of the second study presented their findings to lawmakers
on a legislative finance subcommittee as part of that body’s ongoing
examination of the coal industry. They were followed by Marshall
economist Cal Kent, one of the lead authors of the first report, who
passed out a lengthy memorandum arguing why his team believed the
Downstream Strategies’ report was incomplete.
For their part, the Downstream Strategies team said the WVU-Marshall
study only looked at coal’s benefits and not its costs.
“This is what makes it different,” Ted Boettner of the West Virginia
Center on Budget and Policy said about his team’s report. “It looks at
both sides of the coin.”
The dispute over the financial impact of coal is more than academic. It
raises real questions about whether the industry is taxed and regulated
enough to cover the impacts it has or whether its economic benefits are
enough to make up for those costs.
Many researchers have examined the issue over the years, with both the
industry and its opponents having studies they can pull out to make
their case.
For example, the industry group America’s Power uses a 2006
Pennsylvania State University report finding coal would provide for 6.8
million jobs in the lower 48 states through 2015.
Environmentalists, however, note that a report released this year by
the National Academies of Science found electricity generation from
coal resulted in $62 billion in damages in 2005 alone, with many of
those damages concentrated along the Ohio River Valley. The researchers
didn’t include damages resulting from climate change in that figure.
Both the Downstream Strategies and WVU-Marshall studies looked
specifically at the impact of coal on the state. But Kent believed the
Downstream Strategies report made several errors in honing its focus on
the impact of coal on the state’s general fund and road fund. He said
it failed to measure several direct and indirect sources of revenue
from the industry, and as a result concluded coal raised $307 million
for the state in a single year. The Marshall-WVU report concluded it
raise $676 million.
As a consequence, “it gives you a false impression of what the total
impact actually is,” Kent said.
For instance, the Downstream Strategies report didn’t include the
millions of dollars in local property taxes that go to public schools —
funding the state would likely have to make up if it wasn’t available.
Public education makes up the largest chunk of the state’s general fund
budget.
Kent also took issue with other parts of the report — such as how the
authors calculated the cost of wear and tear by coal trucks on the
state’s roads. But the authors themselves were skeptical of some of
Kent’s criticisms; in the case of the coal trucks they noted the gap
between the amount needed to maintain roads and what the industry
actually pays.
“Even the state agencies continuously say the coal industry is not
coming anywhere close to making up that cost and the state taxpayers
are paying that bill instead,” said Rory McIlmoil of Downstream
Strategies.
Given both teams received funding from interest groups on opposite
sides of the issue, Guthrie requested the subcommittee look into
whether any independent, peer-reviewed studies exist that look at the
impact of the coal industry. It was a suggestion that Boettner said was
worth pursing, noting West Virginia was among the states that didn’t
have a legislative agency to conduct that kind of research.
“We need a legislative fiscal office in the state that would do
non-partisan analysis that doesn’t have a bias,” he said.