West Virginia Wants Coal Hard Cash

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A coal mine in the distressed Appalachian Mountains city of Welch, West Virginia


The country’s newest Republican governor is, like President Donald Trump, a billionaire businessman, a political outsider, and a fan of the coal industry. West Virginia Gov. Jim Justice, a former coal company owner, was elected as a Democrat but switched parties with a surprise announcement at a Trump rally in West Virginia.

Ashton Marra

Jim Justice announces his campaign for governor of West Virginia.

Both Trump and Justice campaigned on promises to bring coal mining jobs back to the region. Now Justice wants the president to prop up the flagging coal industry with federally-funded incentives for power companies to purchase coal from Appalachia.

At a recent press conference Justice explained what he called one of his “big ideas” to revive mining in the eastern U.S. He’s pushing the White House for an estimated $4.5 billion subsidy for Appalachian coal, something he called a matter of national security.

“I want our president to move forward with the possibility of creating a homeland security incentive for all coal that is purchased,” Justice said, referring to Appalachian basin coal used by power plants in the eastern states.

Appalachian coal is expensive, at some $45 to $55 per ton. Coal from larger, easier-mined seams in Wyoming and Montana sells for $12 to $30 per ton. Justice wants a $15 per ton payment to help Eastern coal compete.

Justice’s pitch to Washington is that the payments will bring coal jobs and secure the nation’s eastern electrical grid, which he argued has become too dependent on natural gas. Justice warned that makes the system vulnerable to terrorist attack or other disruption and makes the price tag for his proposal a reasonable investment.

“[It] is just an absolute fraction of the price to pay for security for protection,” he said.

West Virginia Democratic Senator Joe Manchin and Trump’s Energy Secretary, Rick Perry, share Justice’s concerns about coal and grid security. They’ve not endorsed the subsidy proposal, but during a recent visit to a West Virginia coal-fired power plant both spoke about the need to keep coal in the nation’s fuel mix.

Manchin pointed to a month’s supply of coal stockpiled behind him.

“What you see laying out there is reliable, uninterruptible power,” Manchin said.

Perry said a DOE study he’s ordered of the nation’s power grid is likely to demonstrate substantial need for the baseload power generation coal can provide.

“I don’t want to be on the receiving end of that phone call that comes from a family whose grandmother has died in the house because there’s no electricity,” Perry said.

However, many policy analysts say there’s little economic justification for a coal subsidy, and Justice’s proposal is divisive even within the coal industry. Western coal associations call Justice’s proposal misguided, big-government market manipulation.

The proposal also has not gone down well with Wyoming politicians.  In an emailed statement to The Daily Caller, Sen. John Barrasso said, ““When the federal government starts picking energy winners and losers, American taxpayers lose.”  Representative Liz Cheney issued a statement saying, ““Such a policy would be flat wrong, unjust, bad economic policy, and would be adopting the worse tactics of the Obama era when the government wasted billions of taxpayer dollars attempting to pick winners and losers and undermine the market.”

Robert Stavins, who directs the Harvard University Environmental Economics program, called Justice’s idea “highly problematic on a variety of dimensions.” In an email, Stavins said there is “no economic justification for subsidizing eastern coal and thereby disadvantaging western, Powder River Basin coal, where productivity is substantially greater.”

Jason Bordoff, who directs Columbia University’s Center on Global Energy Policy, agreed.

“This seems like a rather transparent effort to subsidize an industry that has been in structural decline for not only years but decades,” he said.

Bordoff served on the staff of the National Security Council during the Obama administration, where he spent a lot of time considering security threats to energy. He said government stockpiles of coal and oil already exist and that the nation’s rail system is integrated, interconnected and resilient to attack.

“While concerns about fuel supply reliability are legitimate,” he said, “picking winners by subsidizing the production in the name of national security of one fuel that is declining because of all these market forces, and has a lot of environmental externalities associated with it, is not as smart or cost effective solution.”

Kudzu grows near a coal preparation plant in eastern Kentucky.

Bordoff said even with a subsidy, Appalachia’s coal industry isn’t likely to turn around. He said time and money would be better spent building up new economies to support communities throughout the region.

Justice said he knows coal and how dependent his state is on the tax revenue coal production creates.

Before becoming governor Justice owned about 70 coal mines in five states. Like Trump, he put family members in charge of his businesses while he’s in office. Market analysis indicates the subsidy he’s suggesting would provide millions which would make Justice family coal more attractive. But with Justice’s estimated worth of $1.6 billion, political analyst Robert Rupp said he doubts money was Justice’s motivation.

“In the presidency and the governorship we have two billionaires who are not needing money, they’re needing big results,” Rupp said.

Rupp, a political historian at West Virginia Wesleyan College, said that while both promised to bring coal jobs back to the region, neither the president nor the governor has been particularly effective in advancing a political agenda.

Justice said the White House is considering his idea, but he hasn’t secured any promises from the administration.

This story comes to us from the Ohio Valley ReSource, a regional journalism collaborative reporting on economic and social change in Kentucky, Ohio, and West Virginia.

What’s Next:

  • Inside Energy’s Dan Boyce recently profiled a Colorado coal miner and his community.
  • Check out our documentary Collapse Of Coal, covering what is happening to the industry in the west and the east.  
  • There is a lot of skepticism about whether Donald Trump can fulfill his promise to put coal miners back to work.  Here’s our take on the day after he was elected.
  • Ted Lapis

    When the Office of Surface Mining’s “Stream Protection Rule” (SPR) was defeated, Wyoming coalminers, Wyoming schools, and Wyoming’s budget all took a hit. WV, VA, & KY have buried more than 2,000 miles of streams during”mountain top removal” operations. The Powder River Basin (PRB) in WY is dry, with rolling hills.

    The Midwestern & Eastern coal companies that bought into the PRB, did so as a defensive investment. They never wanted a single ton of PRB coal shipped, but they had no other way to stay in business.

    The PRB was opened after the OPEC energy shock of the early 1970s, by Big Oil. PRB coal sold for $27.50/ton in 1978, but by 1997, the spot market price had fallen to ~$1.70/ton. Government records track average contract prices, not marginal cost of production, which is the cost basis for spot market pricing.

    The PRB shutdown over 1,000 coalmines in the USA, due to large scale mining, and the railroads brought in by the Big Oil Companies, who thought that they wanted to be integrated energy companies. When the serving utilities & railroads made it clear that they would block any attempt to upgrade and differentiate coal, Big Oil sold out, to Big Coal.

    The oil companies could not match the railroads’ market power, and the utilities blocked power production aspirations. Coal prices plummeted, mines changed hands, and Wyoming lost jobs & revenues. The lack of engagement by Wyoming voters, continues to allow bad things to happen. Wake up Wyoming!