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.