Coal Tattoo

What does coal cost Kentucky?


The coal industry takes $115 million more from Kentucky’s state government annually in services and programs than it contributes in taxes.

That’s the lead of the lead of the Lexington Herald-Leader’s story today about a new study examining the costs and benefits of coal-mining on Kentucky.

The study comes on the heels of a peer-reviewed paper by a West Virginia University researcher that found the coal industry costs the Appalachian region five times more in early deaths than it provides in economic benefits. The Kentucky study was put together by the Berea-based Mountain Association for Community Economic Development, or MACED, which spent a year examining the coal industry’s impact on the state’s general fund and road fund. (Who is MACED? Find out here).

The study is available here. It want to point out that this is not, as the WVU study was, a scientific paper published in a peer-reviewed journal. But it’s still newsworthy.

Of course, my buddy Bill Caylor at the Kentucky Coal Association doesn’t need to read the study to challenge it, as the Herald-Leader’s intrepid John Cheves pointed out:

Bill Caylor, who lobbies Frankfort for the Kentucky Coal Association, said he didn’t know about the study and thus had no specific rebuttal, but he’s sure it’s inaccurate. The coal industry contributes plenty and is the largest private employer in some Eastern Kentucky counties, Caylor said.

“I’ve got a lot of choice words that I could offer on this, but it would sound pretty bad,” Caylor said. “It’s voodoo economics.”

Today’s release actually includes two studies, The Economics of Coal in Kentucky: Current Impacts and Future Prospects  and The Impact of Coal on the Kentucky State Budget.

The budget study explain, as the chart below shows:

Coal is responsible for an estimated $528 million in state revenues and $643 million in state expenditures. The $528 million in revenues includes $224 million from the coal severance tax and revenues from the corporate income, individual income, sales, property (including unmined minerals) and transportation taxes as well as permit fees. The $643 million in estimated expenditures includes $239 million to address the industry’s impacts on the coal haul road system as well as expenditures to regulate the environmental and health and safety impacts of coal, support coal worker training, conduct research and development for the coal industry, promote education about coal in the public schools and support the residents directly and indirectly employed by coal. Total costs also include $85 million in tax expenditures designed to subsidize the mining and burning of coal.


The study adds:

These figures cover only a portion of the full costs of the coal industry to the state. We do not include the many externalized costs imposed by coal including healthcare, lost productivity resulting from injury and health impacts, water treatment from siltation caused by surface mining, water infrastructure to replace damaged wells, limited development potential due to poor air quality, and social spending associated with declines in coal employment and related economic hardships of coalfield communities. Some of these externalities impose additional costs directly to the state budget while others are borne by communities that mine and burn coal and by those outside the region. The report relies on 2006 figures and does not include the significantly expanded subsidies for advanced coal enabled by House Bill 1 of the 2007 special session of the Kentucky General Assembly.

The other Economics of Coal study concludes:

Kentucky’s coal industry remains a significant economic player in some parts of the state and will be part of the state’s economy and nation’s energy mix for the immediate future. In the long term, however, it is an industry in decline. Current trends suggest that Kentucky-based coal companies are at a competitive disadvantage vis-à-vis western and other producers, and that this disadvantage is likely to increase in the future. Economically-recoverable coal reserves are diminishing. Meanwhile, Kentucky’s top coal-producing counties remain among the most distressed counties in the nation, leaving them vulnerable to future shifts in mining employment. While potential new technologies provide some emerging opportunities for coal markets, the impacts of these developments are unknown. As costs and regulatory concerns mount, the future of Kentucky’s coal industry is uncertain. What is known is that Kentucky’s coal industry faces tough challenges with regard to rising costs, labor shortages and a growing national push for cleaner energy. These issues will be at the forefront of debates about Kentucky coal in the foreseeable future.